This is the third post in a four part series on what you can do to cultivate stability and peace of mind in your financial life.
Get adequate insurance. Illnesses and accidents can happen to anyone. Without appropriate insurance, you put your financial health at great risk. More than a few families have gone bankrupt due to lack of insurance in times of need. Protect yourself and your family from major expenses and large decreases in income. Having adequate insurance really can avert financial disaster.
One major category of insurance concerns your health: medical, disability, long term care, and life insurance. They help cover expenses or provide an income in case you can’t work.
The other major category of insurance involves things you own: car, motorcycle, boat, and homeowner’s or renter’s insurance. They cover damage to your property and also liability if you caused injury to others.
Insurance is a complex topic. Each of the different types have their own rules and quirks. It’s very important to become educated about insurance so you can purchase policies that are right for you. Here are a couple of resources to help you get started: Consumer Action’s Insurance Center and the National Association of Insurance Commissioner’s Insure U.
Besides being complicated, another common complaint about insurance is the cost. Yes, those premiums do add up. But don’t be penny wise and pound foolish by skipping necessary coverage. Here are some strategies for keeping costs under control.
- Only buy necessary insurance. Remember, the point of insurance is to protect against big financial losses and expenses. Life insurance for children, for instance, is an example of unnecessary insurance. Loss of a child is emotionally devastating but unless your child is a star and her earnings are supporting the family, her death will not create a huge financial loss.
- Get the coverage you need and nothing more. Over insuring is a waste of money. Review your coverage every couple of years to make sure you’re not over or under insured. If the current replacement cost for your home is $200,000, don’t get a policy that covers $300,000 in replacement costs. If you’ve had the same life insurance for the last twenty years, you probably need less or none at all now that your kids are grown and on their own. But if you’ve just had a baby, you might need to get or to increase life insurance coverage. Also eliminate any duplicate coverage.
- Self insure for small losses such as a broken window or a doctor’s visit. Save the insurance for bigger expenses such as fires or surgery. Filing claims will drive up your insurance premium so pay for the smaller things yourself. If you increase your deductible (the amount you pay before insurance kicks in), you’ll also lower your premium. Just make sure you have money allocated in your spending plan for these smaller expenses.
- Use the same insurance company as much as possible for all your insurance needs. You’ll get discounts for having multiple policies. Also be sure to ask what other discounts are available to make sure you’re getting the lowest rate possible. Every couple of years, comparison shop to see if you can get better rates else where for the same coverage. Just be sure the insurance company is highly rated for financial strength. It’ll do you no good to get a cheap policy from a company that can’t pay benefits.
- Take care of what you’re insuring. If you maintain good health, your medical and life insurance will be cheaper. If you maintain your car, you’re less likely to have an accident due to mechanical failure. If you take good care of your house, it’ll stand up better to the elements and natural disasters.
Here are some resources to help you shop around for insurance. Be aware that you do need to provide some personal information to get quotes and insurance agents will follow up with you.
It may seem like a waste of money to pay for insurance when everything is fine but you’ll be glad you did if anything unexpected should happen.