What Types of Insurance Do You Really Need?

For the month of February, www.thewisebuck.com is going to focus on giving you tips about insurance. Life Insurance, Health Insurance, Auto Insurance, Home Owners Insurance, etc. And, while I know this probably isn’t your (or my) favorite or most exciting personal finance topic, it is very important in creating financial independence and safe guarding our financial world. How so?

By properly insuring yourself, you will safeguard yourself and your personal assets from financial catastrophe and unexpected situations. Properly insuring yourself will also bring you peace of mind from life’s little surprises.

I thought I would start out this month talking about the kinds of insurance I think you need. By no means is this an exhaustive list or meant to suggest you drop or change any of your existing coverages. But these are the things I wouldn’t live without. Ultimately, these are my ideas and opinions and I hope you find them useful.

Personally, when it comes to life insurance, I believe in term insurance. I would recommend that you get 10-12 times your annual salary and as far out (term wise as you can afford) Affordable. That’s the key, you have to make sure you can afford the payments as they come in month to month. Don’t get a policy you can’t afford because if you drop it 3-4 years down the line, it only becomes more expensive as you get older. The rule of thumb is to get the maximum amount and longest term you need (10-12 times annual income) and that you can afford.

1) Auto Insurance

Yes, you and I both. We all need auto insurance. In most states it’s the law. If you’re paying off a loan, it’s also required. One of the better places to shop around for auto insurance is Car Insurance

2) Health Insurance

Yes, it’s a must! Medical bills are one of the largest reasons for personal bankruptcy. With the high cost of medical care, health insurance is extremely important to carry. One bad move or careless mistake (no coverage) and you could be wiped out. This is really where we are talking about protecting that nest egg of yours. And, while I am the first to admit that health insurance is mostly expensive, there are ways to cut costs for health insurance as well. What you want is a policy that will cover major events. You can also raise the deductible to save on the cost, especially if you aren’t going to the doctor too often.

You may want to consider a Health Savings Account Plan, which is an insurance plan with a tax-free savings account attached to it. This account allows you to put money aside to cover your deductible. So, if you’re someone who doesn’t go to the doctor every month, a HSA is a good thing to consider

3) Disability Insurance

Most people don’t consider disability insurance. I would personally check into this at your workplace. If your employer offers this and it’s relatively affordable, seriously consider this. In some cases, employers make this really affordable and it should be a no brainer.

4) Long-Term Care Insurance

This type of insurance is very important when you are over 60.

5) Home Owners or Renters Insurance

I think homeowner’s makes good sense, especially if you have a lot of valuables inside your home.

Here are a few Wise Buck Truisms when buying insurance

* Shop around and price things out. Take your time. Do not rush. If someone rushes you, leave or hang up.

* If you buy insurance, do so through an independent agent, versus a captive agent. Independent agents have access to dozens of policies whereas captive agents are restricted to their company’s proprietary products and policies.

Of course there are other types of insurances to consider, but these are the one’s I wouldn’t live without. Being caught uninsured, can seriously jeopardize your financial health.

Please feel free to share your ideas about insurance and why you may have certain policies for you and your family.