Getting the Right Insurance
There are more types of insurance policies available than you can imagine. The problem is understanding what kind of insurance you really need. Spending money on insurance policies is an act of faith: you are buying promises that you hope will never have to be kept. But because none of us can predict the future, it's crucial that you protect your assets and your family from risks. Insurance is the way to do it.
The purpose of insurance is to protect your assets against catastrophic losses that could damage your financial future. Whether that asset is a house, a car, or your income-earning ability, insurance protects your from financial disaster. Decide how much risk you can assume and insure the rest.
To keep the cost of your insurance policies down, you must comparison-shop. Costs can vary greatly. Check out the rating of the insurance company you are thinking of doing business with. Various organizations evaluate and rate insurance companies, judging them on their financial stability and health.
Protecting Your Future
If you have not retired, your ability to earn an income is probably your biggest asset. Protecting your future means insuring it against catastrophic losses that could result if you are unable to work for an extended period of time due to illness or injury. Short and long-term disability insurance protects your income-producing ability when you're unable to work due to illness or injury.
Ironically, although the likelihood of becoming disabled is greater than the likelihood of dying during any given period or time, more people buy life insurance than disability insurance. Don't make the mistake of thinking that you're too young or healthy to require disability insurance.
Medical Insurance
No matter how young or old you are, you need health insurance to protect yourself against financial disaster if you become seriously ill or have an accident. It's amazing how many people think they can do without health insurance. A serious accident can wipe out you and your family financially.
All medical insurance policies are not created equal and you need to be aware of what is and is not covered in your policy. At a minimum, be sure your policy contains basic insurance, which includes hospital, surgical, and physicians expenses, as well as major medical insurance to cover expenses beyond the limits of your basic insurance policy. Look for major medical insurance coverage of at least $1 million.
Life Insurance
Providing for those you love allows them to continue with the plan for achieving financial independence in the event that you are not there to make it happen. This might mean establishing a source of income for dependents; an education fund for your children; or a retirement fund for a surviving spouse. The most common method to implement these type plans is by purchasing life insurance.
Life insurance can provide an instant source of funds for your family. The amount you need depends on your other sources of income, the number of dependents you have, your debts and your lifestyle. The general guideline is between five and ten times your salary.
Term life insurance, which is usually the least expensive form of life insurance, pays a death benefit to your beneficiary or beneficiaries if you die while the insurance is in force. If you live past that period and don’t renew your policy, or if you stop paying the premium, the coverage ends and no payment is made.
Protecting the Things You Own
Getting protection for the things you own limites your losses if your property is damaged, destroyed or stolen, or if you cause damage to others or their property. If you have a car, or own or rent your home, consider purchasing insurance to protect yourself and the things you own.
Homeowner's Insurance or Renter's Insurance
Both homeowners and renters should have insurance to cover personal property losses and liability. Whenever possible, purchase replacement cost insurance for personal property. This type of insurance will provide you with the funds to purchase a new item to replace the old one. Otherwise, you may only receive the current market value of items that were damaged or stolen.
If you own a home, no matter how modest, you can't afford to be without homeowner's insurance. Homeowner's insurance protects you if your home and any structures attached to it or other structures on your property are damaged or destroyed. Be sure to have guaranteed replacement coverage so the insurance company will pay whatever it costs to rebuild even if it costs more than the limits in your policy.
Auto Insurance
Auto insurance policies typically contain several different forms of coverage - liability, uninsured and underinsured motorist, collison, comprehensive, medical expense payments and miscellaneous services such as towing and provisions for rental cars after an accident.
