Most personal finances topics are anything but sexy, but insurance is the geeky, pimple-faced guy who – if approached by a supermodel at a party – would talk about actuarial tables all night. (No offense to my friends in the insurance industry!)
Nobody likes to think about insurance. You have to carry some kinds of insurance and you should have most other kinds, but it sucks to spend money on insurance. You hope you’ll never need it, so when you buy insurance it feels like you’re throwing thousands of hard-earned dollars down the drain. But if you ever do need insurance, you’ll either be glad you bought it or wishing you had bought it.
There are two kinds of insurance everybody should have: Auto insurance and health insurance. Car insurance is required in most states. And going without health insurance is a huge risk. Because even if you’re young and healthy, a freak accident could leave you with tens of thousands of dollars in medical bills that could totally derail your financial future.
If you own a home, you’ll have to carry home owners insurance. But if you’re a renter, you might want to consider renter’s insurance – a fairly cheap way to protect your belongings from theft or fire.
In most cases you don’t need life insurance before you start a family, but as soon as you have dependents, you’ll want to get a term life insurance policy that can replace your income for your family if you die during your working years.
The questions about when to buy insurance, how to buy it, and how much you need differ dramatically by the kind of insurance (home, renter’s, car, life, or health), and where you are in life (your age, how much you have in assets, where you live), but some pointers apply to all kinds of insurance:
Always shop around for insurance. Don’t let a smooth-talking salesperson talk you into one policy before comparing your options. Premiums and coverage levels vary dramatically among insurers, and you don’t want to overpay.
Understand your coverage. Different policies cover different things. Learn to ask questions when you shop for insurance, like “if my car is totaled how do you calculate the replacement value?” Or “Are there any circumstances in which this life insurance policy would not pay out a death benefit?” Health insurance is especially convoluted. Take a minute to brush up on how factors like your premium, deductible, and coinsurance will impact your policy.
Be wary of insurance you don’t need. Some examples include policies that will pay off your credit card balance or mortgage if you die or cash-value life insurance policies. Other kinds of insurance should be purchased with caution on a case by case basis. Examples include supplemental disability insurance and GAP insurance that will cover the difference between a car insurance payout and any remaining balance on your auto loan.
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Latest Posts on Insurance
The Affordable Care Act attempts to make health insurance easier and more affordable to buy, but getting covered is still confusing. What 20-somethings need to know about buying affordable health insurance.
Do you really need dental insurance? Maybe not. If you have healthy teeth, you might also have a healthier budget by declining dental coverage.
Pet insurance pays veterinary bills (after a deductible) for unexpected illnesses or accidents. If you’re on a budget, having pet insurance offers peace of mind that you won’t one day be faced with the decision to pay thousands to save your pet’s life.
Medical bills are the leading cause of bankruptcy. Although you can’t always avoid a debilitating illness, being smart about your health how you pay for health care can save you thousands.
When you own your house, homeowners insurance covers everything inside — your computers, phones, jewelry and furniture. But what if you rent? Renters insurance is an affordable way to insure your stuff — and that you’ll have a place to live if your apartment is damaged by fire or weather.
Last fall, an errant driver broadsided my Ford Escape, trapping me inside until firefighters cut the car apart with the jaws of life. This is what I learned about the hassles and — even though I had car insurance — the significant costs of being in an accident.
Just because you don’t own a home doesn’t mean you don’t need insurance: Renter’s insurance covers your belongings in the event of a fire, disaster, or burglary.
Car insurance rates vary widely, especially for young drivers. A look at the best car insurance for young adults and the pros and cons of top auto insurance companies.
What is an HSA? How do health savings accounts work? Who’s eligible? Eliminate your confusion about using HSAs with your health insurance plan.
Last December, my wife and I welcomed our second child, Elliot, into the world. As parents, we are ecstatic but weary. As a no-longer only child, big sister Molly remains skeptical. They say that having two children is more than twice the work of one, but I think that having the first – going from […]