Insurance

Insurance Is the Centerpiece of a Good Financial Plan

Insurance is designed to protect us against some of the risks we face in every day life.

What’s a risk? Death is a certainty, but your time of death isn’t. Life insurance protects your survivors if you die leaving them without a source of income and/or with debt.

Losing your house to fire or flood is risk, so is having your home broken into and half its contents stolen.

Car collisions that injure others or ourselves and cause damage property are a common risk.

Total disability is another risk.

Getting sick is a risk, but insurance companies assume everybody will get sick sooner or later, so health insurance is really pre-payment of medical bills.

You can face a risk, but not have an insurable interest. For example, you can’t buy fire insurance for your apartment building and if it burns down you will get nothing from the landlord’s policy.

If you’re renting a furnished apartment, you can lose your abode, but still have nothing to insure, except for personal belongings, which can be covered by a renter's policy.

You can't buy life insurance for a stranger, making yourself the beneficiary.

You can face a risk but not need coverage. You can be a single person with no heirs. You don’t need life insurance.

If you have absolutely no assets to protect – if you own nothing of value – you don’t really need liability coverage, you’re what’s considered “judgment proof”.

But please note that there are state laws that require all drivers to carry liability coverage, no matter what your financial situation.

It is rare to be able to afford a policy that is going to make you completely whole after a disaster. There are always deductibles and adjustments that will leave you out of pocket. The better your policy, the less your out-of-pocket expenses will be. But your emergency fund – you do have one, right? - should cover them.

But insurance is a vital part of your family's financial plan. With proper coverage, the disasters we all face will not create financial ruin.

You should retain a well respected full service insurance agent or a fee-only based Certified Financial Planner, with whom you can meet periodically to make sure your insurance coverages, as well as your college fund and/or retirement plan, are adequate and going as planned.

The following articles will discuss the major types of insurance that just about everyone should have: life, health, long term disability, homeowners or renters, auto and an umbrella liability policy.

Life Insurance

Health Insurance

Homeowners Insurance

Auto Insurance

Long Term Disability Insurance

Umbrella Insurance

Also see:

The Reservation of Rights Letter
What to do if you receive a reservation of rights letter from your insurance company.

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