In part one of a three part series on insurance I will discuss why you need insurance, and the insurance that you really need to have.
One of the most important things to every human being is health. What happens if you lose your health, and if you do, could you afford it? When we think of health insurance, we generally think of the basics; going to the doctor, prescriptions, and possible emergencies. Thankfully if you are a full-time employee for a typical employer, you are typically eligible to participate in the group health plan, and at a reasonable rate. If you are self-employed, obtaining health insurance can be a bit more involved and costly, but it is just as important. If you lose your health, you could lose everything which is why it should be one of your top insurance priorities.
Since your health is important and doctor visits and prescriptions can be costly, there is one other aspect to health that is often overlooked. What happens if you are hurt or for some reason become disabled and unable to work? This is especially important in a family setting. If one of the adults in the family is unable to work, trying to maintain the family and raise children can suddenly be in jeopardy. Again, this is typically something offered through an employer work plan at little cost, and should be another priority.
A third area to your life and health actually has to do with death. What happens if you were to die? Who would face the financial hardship? If you are single and have no children, this may not be much of a concern. On the other hand, if you have a spouse or children then life insurance is a must have. A sudden loss of a substantial portion of the family income could be devastating. Without life insurance, your loss could put your family at risk. This article won’t be about how much insurance you need, that will discussed later, but if you have a family, then life insurance is a must.
Now that we’ve talked about insuring your health and wellbeing, it is time to discuss insuring your possessions. There are only a few items that must be insured, and they are typically required by law in some instances. First, as most people know is homeowners insurance. If you have a mortgage, most likely the lender requires you to insure the home. The second item is auto insurance. Most states require you by law to have auto insurance, and some lenders also require it, and for good reason. A vehicle is not only an expensive item, it is also something that can cause injury, and that is why auto insurance generally has some sort of liability insurance also attached to it. These are the two mandatory items to insure. Additional expensive items you may own could be insured, such as jewelery, a boat, ATV, etc. Of course, they are not mandatory unless the loss of such item would cause a financial hardship that would hurt you or your family’s financial situation.
As discussed above, these are the mandatory policies to carry, and by no means are these the only things to insure. They are, however, the things you must insure to create a stable financial foundation in the event the unexpected and unfortunate does happen. In Part 2 I will go over types of insurance that could be avoided, and some things to watch out for when purchasing your policies.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.