The 5 Insurance Products Everybody Should Carry | Credit Karma ...

July 24th, 2012

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**Today?s guest post is contributed by Jason Larkins.**

Insurance is the act of transferring your risk of loss (typically monetary) on a particular item (or life) to a corporation. In exchange for transferring that risk, the ?insured? agrees to pay a particular premium amount.

I acknowledge that many insurance products out there are a waste of money, however there are 5 different products that YOU must carry to protect your family and your future.

1. Homeowner?s or Renter?s Insurance

While homeowner?s insurance isn?t required by law, the vast majority of lenders make it mandatory if you plan on carrying a mortgage.

Homeowners can receive compensation for damage or complete destruction to their homes from fires, natural disasters or theft in return for monthly (or annual) premium payments. Typically the structure of the home is covered along with the individual items in it as well. Some policies will also cover the homeowner?s liability for accidents on their property (i.e. somebody falls on an ice patch and breaks a leg).

It?s common to need additional policies for floods or earthquakes, and depending on the area where you live, these policies could be fairly expensive if your city is at high risk for these types of disasters.

If you rent a house, apartment, condo or town home, then renter?s insurance is a must have. The structure that you live in is covered by the landlord?s homeowner?s insurance policy. However, your personal possessions will only be covered if you carry renter?s insurance.

For $12-15/month, it?s a small price to pay especially if you have computers, cell phones, couches, or other valuables within your residence.

2. Auto Insurance

While auto insurance coverage is mandatory by law, the amount varies by state.

Despite the fact that it?s required, there are many uninsured motorists and if you fall in that category then I?m here to say that auto insurance is a MUST HAVE!

There is a lot of risk you carry as a driver: (1) the risk of losing your car, (2) the risk of hurting yourself, and (3) the risk of hurting somebody else and/or their vehicle.

There are three primary types of auto insurance: Liability, Collision and Comprehensive coverage.

• Liability ? this covers damage you to do to another person?s vehicle.
• Collision ? covers any damage done to your vehicle in the event you hit somebody or an uninsured motorist hits you.
• Comprehensive ? understanding that your vehicle may be damaged by something other than a car accident, comprehensive coverage protects your car in the event of theft or fire, if somebody keys your car, etc.

If you?re making payments on your car, collision and comprehensive coverage are often required. If your car is paid off, but still holds some value, or if you don?t have the money to replace your car, then carrying comprehensive collision would be a wise decision.

If you?re driving around in an old beater (like we do), then liability coverage may make most sense and anything more is just a waste of money.

3. Health insurance

Considering that it costs $50,000 for a broken leg and $1,000,000 for an X-ray (joking), if you don?t carry health insurance then you?re leaving your family susceptible to major financial losses and potential disaster.

The best place to get health insurance is through your work, but other options include Cobra, private health insurance and insurance pools.

If you?re unable to get insured due to health reasons, the eventual ObamaCare plan may help that, and in the meantime many states have ?high risk pools? where a non-profit company helps pools of high-risk individuals obtain coverage.

If none these options work for you, consider finding part-time jobs at places like UPS or Starbucks where all employees are offered health insurance.

4. Life Insurance

Yes? life insurance is an absolute MUST if you have dependents or are married.

I?ve seen far too many people who have cable, eat out multiple times a week, or have fancy cell phones, but choose to leave their families at risk by not carrying life insurance.

I realize many of us believe that ?it will never happen to us,? but I?ve personally seen where this mindset has crippled families after one of the family?s income-earners suddenly passes.

While there are numerous types of life insurance, a great place to start (and the cheapest) is to get a 20- or 30-year term life insurance policy that is worth at least 10 times you annual income.

5. Long-Term Disability insurance

According to the U.S. Census Bureau there is a 15-20% chance that you?ll get disabled to the extent that you can no longer perform your job, and that possibility makes this the fifth most important insurance product to carry.

Long-term disability insurance will replace a portion of your income (typically 50-70%, depending on the policy you buy) in the event that you get ?disabled? for more than 90 days. The disability could include a physical limitation but likely could be something psychological or involve a major illness.

While many people may wonder about short-term disability insurance, I encourage people to pad their emergency fund enough to cover at least 4 months? worth of expenses. With that amount saved, it would protect you from the 90-day window that a short-term policy covers.

Since insurance is all about covering major, unexpected financial loss, a long-term disability is much more harmful to your family?s future than a short-term problem.

Although budgets are tight, it?s imperative that everybody have these 5 insurance products. Find places in your budgets to cut back and take time to shop your insurance rates to make sure you?re currently getting the best deal.

Jason is a financial advisor and Dave Ramsey-trained counselor that blogs over at WorkSaveLive. He aims to educate his readers on a variety of financial topics while sharing his family?s journey out of debt.

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Source: http://blog.creditkarma.com/blog-series/guest-blogs/the-5-insurance-products-everybody-should-carry/

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