Let's talk about insurance. In these times of rising medical costs, you can't afford NOT to have health insurance. But what other types of insurance should you buy? And how much coverage do you really need? Making A Smart Buying Decision is key to obtaining Helping You Achieve Your Goals and your financial goals for insurance is no exception.
In this post we'll go over how to determine your level of risk, the standard types of insurance available and what each is for, and how you can cut your insurance costs to keep everything as affordable as possible.
Insurance is a way of dealing with risk--the chance of something happening that you don't expect--like a trip to the emergency room. By using insurance, you are simply transferring or sharing your risk with others.
Before buying any insurance, take time to categorize your risks as critical, important, or unimportant to you.
Critical risks are those where a loss could result in bankruptcy, or where coverage is required by law. An example is homeowners insurance, which protects you from theft, break-ins, certain lawsuits, and some natural disasters.
Important risks are those in which a loss could force you to borrow. An example is health insurance.
Unimportant risks are those in which the loss could be met with existing funds or income. An example is an extended warranty on a small appliance.
There are many different types of insurance. Some, such as liability insurance, are required by law if you own a vehicle.
In the slide above we have listed a few of the more common types of insurance you can buy.
Although insurance can be expensive, there are steps you can take to cut your costs. Shop around and compare prices and services offered by different insurance companies. Buy home and auto insurance from the same company if they offer a multiple-policy discount. Don't insure property that's not worth insuring. For example, don't carry collision insurance on a vehicle whose fair market value is less than the insurance deductible. Ask for discounts if you have an alarm, air bags, or anti-lock brakes installed on your car, or a security system, smoke detectors, or fire extinguishers in your home. Insurance is designed to minimize risk, not totally eliminate it. Figure out how much risk you can afford, then set your deductibles--how much you pay before you file a claim--as high as you can afford. Finally, review all insurance policies at least once a year to ensure coverage is appropriate, but not excessive.
Important points to remember about insurance are that its purpose is to transfer or share risk. Before buying any insurance take the time to figure out which risks are critical, important, and unimportant to you--and how much risk you can afford to bear. Then get Tips On Saving Money and comparison shop and ask for discounts in return for safety and security features in your home and vehicles.