How Much Insurance Should You Have...
for Home, Auto, Health and More
by www.SixWise.com
Insurance is a necessary gamble, one that you hope you never
have to really cash in on. Yet, if an accident occurs or medical
bills start pouring in, you need to be sure that you're not
going to suffer financially because of it.
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If you've planned your insurance needs accordingly,
you won't have to worry about your finances in the event
of a medical problem, accident or natural disaster.
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At the same time, you don't want to pour extra money into
insurance premiums for more insurance than you need. How much
insurance is, as Goldilocks said, just right? Here's what
the experts say.
Health Insurance
A 2007 study by Consumer Reports found that a full 24 percent
of the U.S. population is underinsured when it comes to health
insurance (and this does not include the approximately 16
percent of the population that's uninsured).
The amount of coverage that you need depends on you. If you
rarely go to the doctor and are generally healthy, a high-deductible
plan with mostly emergency coverage may suffice as a "safety
net."
If you get sick often, and are in and out of doctors' offices,
you'll want a plan that covers office visits, medications
and the like. If you have children, you'll also want to decide
whether you want their office visits to be covered.
You also need to think about whether you want coverage for
things like elective surgeries or pregnancy, as you may need
special additions for these.
Life Insurance
Life insurance is around to pay your debts and support your
family when you die. Though it's not something that most people
want to think about, it is an important aspect of insurance,
particularly if you have children.
The general rule of thumb for life insurance is to get enough
coverage to cover five to 10 years of your annual gross salary
(just take your annual salary and multiply it by five to 10).
Who doesn't need life insurance? If you're single, have no
dependents and don't have a lot of debt, you can probably
skip life insurance for now.
Auto Insurance
If you want to drive, it's a legal requirement that you get
auto insurance, but the restrictions end there. You should
choose the policy that has the liability coverage to meet
your needs, and not necessarily automatically choose the policy
with the lowest premium.
That said, auto insurance rates vary dramatically -- by up
to $515 for six months of the same coverage, according to
study by Progressive Auto Insurance -- so it pays to shop
around.
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Many people don't think about insurance until it's
too late. Now's the time to make sure you and your family
are protected.
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You should also consider the condition of your vehicle. If
you car is a jalopy, do you need to add comprehensive and
collision coverage? Probably not.
Homeowner's Insurance and Renter's Insurance
Generally speaking, you should insure your home for 100 percent
of its value, according to MetLife. Make sure your policy
is for replacement value (you may have to ask for this specifically),
which means that the company will reimburse you for the cost
of a new replacement for your possessions (not just reimburse
you for what the item was worth, used, which is known as actual
cash value).
Be aware that certain disasters such as floods and earthquakes
may not be covered unless you add them on. Likewise, personal
items like jewelry and art may have a cap on it, so if you
have high-value items you may need to take out an additional
rider to make sure they're adequately covered.
If it comes time for you to make a claim against your homeowner's
insurance, you'll have to give the insurance company a list
of what was lost. You should prepare for this ahead of time
by walking around your home with a video camera (or by taking
photos) and documenting exactly what's there.
Renter's insurance should also cover you for 100 percent
of your belongings (and policies are typically fairly inexpensive).
Homeowner's and renter's insurance are also beneficial in
that they usually give you liability protection as well, so
you're protected if someone falls and gets hurt on your stairway,
for example.
Disability Insurance
Though some employers offer disability insurance in the event
you become injured and are unable to work, it's often not
enough to live on, at least for long.
On top of that, most people do not have adequate savings
to support themselves in the event they can no longer work.
While disability may seem like more of a long shot, it's
actually a necessity. Consider these statistics from the National
Association of Insurance Commissioners (NAIC):
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12 percent of U.S. adults suffer a long-term disability
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One out of every seven workers will suffer a five-year or longer period of
disability before age 65
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Workers who are 35 have a 50 percent chance of experiencing a three-month
or longer disability before they reach age 65. Those who
are 45 have a 44 percent chance.
When deciding on how much disability insurance you need,
first assess how much you may already have from your employer,
Social Security or Worker's Compensation. You should take
out enough of your own coverage so that you'll receive at
least 60 percent of your monthly income, until you reach age
65, in the event you can no longer work.
Be aware that disability policies usually have waiting periods
before the benefits kick in. You need to make sure that your
waiting period is not longer than the time your savings will
last.
Recommended Reading
How
to File an Insurance Claim so You Will Likely WIN It: An Insider's
Guide
Is
Pet Insurance a Good Investment? Find Out Why the Answer Depends
on YOU
Sources
ConsumerAffairs.com
August 6, 2007
ABC
News
Bankrate.com
MSN
Money