I just read this article by Lisa Smith. Seems like a real necessity in the field of financial planning.
After all, we need to balance protection and investments.
After all, we need to balance protection and investments. Protecting your most important assets is an important step in creating a solid personal financial plan. The right insurance policies will go a long way toward helping you safeguard your earning power and your possessions. In this article, we'll show you five policies that you shouldn't do without.
1. Long-Term Disability Insurance
The prospect of long-term disability is so frightening that some people simply choose to ignore it. While we all hope that, "Nothing will happen to me," relying on hope to protect your future earning power is simply not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to continue your current lifestyle even if you can no longer continue working.
The prospect of long-term disability is so frightening that some people simply choose to ignore it. While we all hope that, "Nothing will happen to me," relying on hope to protect your future earning power is simply not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to continue your current lifestyle even if you can no longer continue working.
2. Life Insurance
Life insurance protects the people that are financially dependent on you. If your parents, spouse, children or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies. Think about how much you earn each year (and the number of years you plan to remain employed) and purchase a policy that will replace that income in the event of your untimely demise. Factor in the cost of burial too, as the unexpected cost is a burden for many families.
Life insurance protects the people that are financially dependent on you. If your parents, spouse, children or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies. Think about how much you earn each year (and the number of years you plan to remain employed) and purchase a policy that will replace that income in the event of your untimely demise. Factor in the cost of burial too, as the unexpected cost is a burden for many families.
3. Health Insurance
The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries that result in a hospital stay can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the ever-increasing cost of health insurance is a financial burden for just about everyone, the potential cost of not having coverage is much higher.
The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries that result in a hospital stay can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the ever-increasing cost of health insurance is a financial burden for just about everyone, the potential cost of not having coverage is much higher.
4. Home Insurance
Replacing your home is an expensive proposition. Having the right home insurance can make the process less difficult. When shopping for a policy, look for one that covers replacement of the structure and contents in addition to the cost of living somewhere else while your home is repaired.
Keep in mind that the cost of rebuilding doesn't need to include the cost of the land, since you already own it. Depending on the age of your home and the amenities that it contains, the cost to replace it could be more or less than the price you paid for it. To get an accurate estimate, find out how much local builders charge per square foot and multiply that number by the amount of space you will need to replace. Don't forget to factor in the cost of upgrades and special features. Also, be sure the policy provides adequate coverage for the cost of any liability for injuries that occur on your property.
Replacing your home is an expensive proposition. Having the right home insurance can make the process less difficult. When shopping for a policy, look for one that covers replacement of the structure and contents in addition to the cost of living somewhere else while your home is repaired.
Keep in mind that the cost of rebuilding doesn't need to include the cost of the land, since you already own it. Depending on the age of your home and the amenities that it contains, the cost to replace it could be more or less than the price you paid for it. To get an accurate estimate, find out how much local builders charge per square foot and multiply that number by the amount of space you will need to replace. Don't forget to factor in the cost of upgrades and special features. Also, be sure the policy provides adequate coverage for the cost of any liability for injuries that occur on your property.
5. Automobile Insurance
Some level of automobile liability insurance is required by law in most localities. Even if you are not required to have it and you are driving an old junker that has been paid off for years, automobile liability insurance is something you shouldn't skip. If you are involved in an accident and someone is injured or their property is damaged, you could be subject to a lawsuit that could cost you everything you own. Accidents happen quickly and the results are often tragic - having no automobile liability insurance or purchasing only the minimum required coverage saves you only a small amount of money and puts everything else that you own at risk.
Some level of automobile liability insurance is required by law in most localities. Even if you are not required to have it and you are driving an old junker that has been paid off for years, automobile liability insurance is something you shouldn't skip. If you are involved in an accident and someone is injured or their property is damaged, you could be subject to a lawsuit that could cost you everything you own. Accidents happen quickly and the results are often tragic - having no automobile liability insurance or purchasing only the minimum required coverage saves you only a small amount of money and puts everything else that you own at risk.
*Bonus Tip For Business Owners: In addition to the policies listed above, business owners need business insurance. Liability coverage in a litigation-happy society could be the difference between a long and prosperous endeavor or a trip to bankruptcy court.
And in relation to this I'll also share a similar topic. That tells us some policies that we don't really need.
1. Private Mortgage Insurance
The infamous private mortgage insurance (PMI) is well-known to homeowners because it increases the amount of their monthly mortgage payments. PMI is an insurance policy that protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance but derives no benefit. Fortunately, there are several ways to avoid paying for this unnecessary policy. PMI is required if you purchase a home with a down payment of less than 20% of the home's value. The small down payment is viewed as putting you at risk of defaulting on the loan. Put down at least 20% and the PMI requirement goes away. Alternatively, you can put down 10% and take out two loans, one for 80% of the sale price of the property and one for 10%, although interests rates can prevent the economics of this maneuver from working out in the homeowner's favor.
The infamous private mortgage insurance (PMI) is well-known to homeowners because it increases the amount of their monthly mortgage payments. PMI is an insurance policy that protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance but derives no benefit. Fortunately, there are several ways to avoid paying for this unnecessary policy. PMI is required if you purchase a home with a down payment of less than 20% of the home's value. The small down payment is viewed as putting you at risk of defaulting on the loan. Put down at least 20% and the PMI requirement goes away. Alternatively, you can put down 10% and take out two loans, one for 80% of the sale price of the property and one for 10%, although interests rates can prevent the economics of this maneuver from working out in the homeowner's favor.
2. Extended Warranties
Extended warranties are available on a host of appliances and electronics. From a consumer's perspective, they are rarely used, particularly on small items such as DVD players and radios. If you purchase a reputable, brand-name product, you can be fairly certain it will work as advertised and that the extended warranty is statistically likely to be unnecessary. If you spend $5,000 on a giant, flat-screen television, the policy is still unlikely to pay off, but might make you feel better. For everything else, forget it.
Extended warranties are available on a host of appliances and electronics. From a consumer's perspective, they are rarely used, particularly on small items such as DVD players and radios. If you purchase a reputable, brand-name product, you can be fairly certain it will work as advertised and that the extended warranty is statistically likely to be unnecessary. If you spend $5,000 on a giant, flat-screen television, the policy is still unlikely to pay off, but might make you feel better. For everything else, forget it.
3. Automobile Collision
Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan out on the car, the loan issuer is likely to require that you have collision insurance. If your car is paid off, collision is optional; therefore, if you have enough money in the bank to cover the cost of a new car, collision insurance may be an unnecessary expense. This is particularly true if you are driving an old car, because cars depreciate so quickly that many vehicles are worth only a fraction of their purchase price by the time the loan is paid in full.
Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan out on the car, the loan issuer is likely to require that you have collision insurance. If your car is paid off, collision is optional; therefore, if you have enough money in the bank to cover the cost of a new car, collision insurance may be an unnecessary expense. This is particularly true if you are driving an old car, because cars depreciate so quickly that many vehicles are worth only a fraction of their purchase price by the time the loan is paid in full.
4. Rental Car Insurance
Most auto insurance policies offer additional coverage for the cost of car rentals, touting it as a useful feature if your car is ever involved in an accident and needs to spend some time in the repair shop. This may sound like a good idea, but in reality, most people rarely rent a car, and when they do, the cost is relatively low and hardly worth insuring against. Although rental car insurance is relatively inexpensive, amortized over the course of a lifetime you are still likely to spend far more than you will benefit.
Most auto insurance policies offer additional coverage for the cost of car rentals, touting it as a useful feature if your car is ever involved in an accident and needs to spend some time in the repair shop. This may sound like a good idea, but in reality, most people rarely rent a car, and when they do, the cost is relatively low and hardly worth insuring against. Although rental car insurance is relatively inexpensive, amortized over the course of a lifetime you are still likely to spend far more than you will benefit.
5. Car Rental Damage Insurance
Many auto insurance policies already cover rentals, so there's no need to pay for this twice. Check your policy before you pay. Depending on where you rent the vehicle, you may also be able to pay a small fee for insurance on your rental when you pick it up at the rental center. If this fee is less than what you'd pay for a year in your old policy, choose the fee over the policy.
Many auto insurance policies already cover rentals, so there's no need to pay for this twice. Check your policy before you pay. Depending on where you rent the vehicle, you may also be able to pay a small fee for insurance on your rental when you pick it up at the rental center. If this fee is less than what you'd pay for a year in your old policy, choose the fee over the policy.
6. Flight Insurance
Flight insurance coverage is completely unnecessary. Despite media portrayal, airline accidents are relatively rare, and your life insurance policy should already provide coverage in the event of a catastrophe.
Flight insurance coverage is completely unnecessary. Despite media portrayal, airline accidents are relatively rare, and your life insurance policy should already provide coverage in the event of a catastrophe.
7. Water Line Coverage
Water companies have made an aggressive push to sell policies that cover the repair of the water line that runs from the street to your house. The odds are in your favor that you will never use this coverage, particularly if you live in a newer home. If you live an average suburban neighborhood and you do need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less. The same goes for policies offered by other utility companies.
Water companies have made an aggressive push to sell policies that cover the repair of the water line that runs from the street to your house. The odds are in your favor that you will never use this coverage, particularly if you live in a newer home. If you live an average suburban neighborhood and you do need to repair the water line, the distance to the street is short, the likelihood of a problem is low and repair costs are a few thousand dollars or less. The same goes for policies offered by other utility companies.
8. Life Insurance for Children
Life insurance is designed to provide a safety net for your heirs/dependents. Because children don't have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids. Instead, use the money that you would have spent on life insurance to fund an education plan or an individual retirement account (IRA).
Life insurance is designed to provide a safety net for your heirs/dependents. Because children don't have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids. Instead, use the money that you would have spent on life insurance to fund an education plan or an individual retirement account (IRA).
9. Flood Insurance
Unless you live in a flood plain or an area with a history of water problems, don't even bother buying flood insurance. If none of the homes in the area has ever been flooded, yours is unlikely to be the first.
Unless you live in a flood plain or an area with a history of water problems, don't even bother buying flood insurance. If none of the homes in the area has ever been flooded, yours is unlikely to be the first.
10. Credit Card Insurance
Purchasing coverage to pay your credit card bill in the event you cannot pay it is a waste of money. A far better idea is to avoid running up your credit cards in the first place, so you won't need to worry about the bills. Not only do you not save on the insurance premiums, you'll also save the interest on your debt.
Purchasing coverage to pay your credit card bill in the event you cannot pay it is a waste of money. A far better idea is to avoid running up your credit cards in the first place, so you won't need to worry about the bills. Not only do you not save on the insurance premiums, you'll also save the interest on your debt.
11. Credit Card Loss Insurance
Federal law limits your liability if your credit card is stolen. Your out-of-pocket costs are limited to $50 per card and not a penny more. In fact, many credit card companies don't even try to collect the $50.
12. Mortgage Life Insurance
Mortgage life insurance pays off your house in the event of your death. Rather than add another policy - and another bill - to your list of insurance plans, it makes more sense to get a term-life policy instead. A good life insurance policy will provide enough money to pay off the mortgage and to cover other expenses as well. After all, the mortgage isn't the only bill your survivors will need to pay.
Federal law limits your liability if your credit card is stolen. Your out-of-pocket costs are limited to $50 per card and not a penny more. In fact, many credit card companies don't even try to collect the $50.
12. Mortgage Life Insurance
Mortgage life insurance pays off your house in the event of your death. Rather than add another policy - and another bill - to your list of insurance plans, it makes more sense to get a term-life policy instead. A good life insurance policy will provide enough money to pay off the mortgage and to cover other expenses as well. After all, the mortgage isn't the only bill your survivors will need to pay.
13. Unemployment Insurance
This coverage makes minimum payments on your bills if you are out of work, which sounds like an attractive proposition. A better plan is to save your money and build up an emergency fund instead. You won't have to cover the cost of the insurance policy and, if you are never out of work, you won't spend any money at all.
This coverage makes minimum payments on your bills if you are out of work, which sounds like an attractive proposition. A better plan is to save your money and build up an emergency fund instead. You won't have to cover the cost of the insurance policy and, if you are never out of work, you won't spend any money at all.
14. Disease Insurance
Policies are available to cover cancer, heart disease and other maladies. Instead of trying to identify every possible disease that you may encounter, get a good medical coverage policy instead. This way, your medical bills will be covered regardless of the problem you face.
Policies are available to cover cancer, heart disease and other maladies. Instead of trying to identify every possible disease that you may encounter, get a good medical coverage policy instead. This way, your medical bills will be covered regardless of the problem you face.
15. Accidental-Death Insurance
Unless you are extraordinarily accident prone, an accident is unlikely. Major catastrophes such as car wrecks and fires are covered under other policies, as is any harm that comes to you while at work. Accidental-death policies are often fraught with stipulations that make them difficult to collect on, so skip the hassles and get life insurance instead.
Unless you are extraordinarily accident prone, an accident is unlikely. Major catastrophes such as car wrecks and fires are covered under other policies, as is any harm that comes to you while at work. Accidental-death policies are often fraught with stipulations that make them difficult to collect on, so skip the hassles and get life insurance instead.
Shop Carefully
Insurance policies come in a wide variety of shapes and sizes and boast many different features, benefits and prices. Shop carefully, read the policies and talk to the salesperson to be certain that you understand the coverage and the cost. Make sure the policies that you purchase are adequate for your needs, and don't sign on the dotted line until you are happy with the purchase.
Insurance policies come in a wide variety of shapes and sizes and boast many different features, benefits and prices. Shop carefully, read the policies and talk to the salesperson to be certain that you understand the coverage and the cost. Make sure the policies that you purchase are adequate for your needs, and don't sign on the dotted line until you are happy with the purchase.
Hope you learned a lot from reading this.
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