Insurance Gap Analyzer

Insurance is a defensive asset class — you buy it to protect against catastrophic loss, not to grow wealth. The standard approach is to handle each type in isolation: life insurance via your job's benefits enrollment, disability via whatever your employer offers, LTC never-thought-about-until-it's-too-late. The result is uncoordinated coverage with predictable holes.

Life insurance is usually under-bought. The textbook calculation: 10x annual income for the primary earner, plus debt + future education + final expenses, minus existing coverage. A typical 40-year-old with $100K income and 2 kids needs around $1M-$1.5M in coverage. Group life through employer is usually $50K-$250K — leaving a $750K+ gap. Term life is cheap at this age ($30-$60/month for $1M / 20-yr term in good health). The cost of underinsurance is family financial collapse on death; the cost of full coverage is one streaming subscription.

Disability is usually under-bought AND misunderstood. If you're working age, your ability to earn income is your biggest financial asset — often $2M-$5M in lifetime earning power. Most people insure their car better than they insure that. Employer DI typically covers 60% of base salary (taxable), with limited definitions (any-occupation after 24 months). Private DI fills gaps: own-occupation definition (pays if you can't do your job, not any job), non-cancelable, with riders for inflation and benefit increase. Premiums run 1-3% of income. Skipping it is the single most consequential mistake in personal finance.

Long-term care is usually unaddressed entirely. 70% of people 65+ need some form of LTC. The average stay is 3 years. Costs: $69K/yr (assisted living), $116K/yr (private nursing home). Medicare does NOT cover it. Medicaid only kicks in after you've spent down assets to ~$2K (varies by state). The three real options: self-insure (set aside $300K-$500K), buy traditional LTC insurance ($2-8K/yr premium, increasingly expensive and hard to get), or buy hybrid life + LTC policies (combine life insurance + LTC rider, smaller per-dollar but guaranteed-issue and won't lose value if unused).

The compounding cost of waiting. Insurance premium curves are nonlinear with age. A 30-year-old can buy 20-year level term life for what a 50-year-old pays for 10-year level. LTC premiums roughly double between age 50 and 60. Disability is often impossible to get past 55. Buying coverage when you're young and healthy is cheap insurance against being uninsurable later. Most families optimize for almost everything except the timing of these decisions.