Can we agree that you need insurance? Can we also agree that insurance premiums can put a strain on any family budget? Insurance is a product you buy, but cannot see and hopefully will never use. Unless you’re wealthy enough to cover unforeseeable expenses that could result from loss or damage to your auto, home, health, or life, you need the protection of insurance to keep you within your budget when mishaps occur, which they will.
As much as paying your bills on time or accumulating savings, good money management also involves protecting yourself and your family from sudden financial catastrophe. Often it can be tempting to put off purchasing different necessary types of insurance. But stop and think about how quickly your financial health could be jeopardized or destroyed by any number of unexpected events that can and do occur when least expected such as illness or accidents.
As you construct your budget it is essential that you build in and account for the cost of maintaining insurance protection for yourself and your family. You need adequate insurance to cover the cost of repair or replacement for your home and any vehicles you own, to provide protection against catastrophic medical and health care costs, and to provide for your family in the event of the death or permanent disability of a wage earner.
The only time you need it is when something bad has happened, and the rest of the time it’s just an expense for something you hope you never need. The inescapable fact is, however, that the cost of insurance, whether you think of it as a necessary evil or an indispensable tool, is something you must include as a part of your overall financial plan.
Probably the most common question most people ask about insurance protection is, “How much do I need”? While this question can only be answered according to your particular situation, needs and budget, just remember that an important part of the process of building your new financial plan will require budgeting a certain amount each month to protect your home and family from a catastrophic loss. Many plans and policies are available for almost any budget. Also, when purchasing any type of insurance, don’t forget that higher deductibles increase out of pocket expenses in the event you have a claim, but the monthly premiums are less. You must consider which plan will work best for your budget. Even if you have to start with only minimum basic coverage in some areas, just remember that any type of insurance coverage that you decide to purchase should be considered carefully for the purpose of insuring and protecting those aspects of your life that would be irreplaceable or that would be financially crippling if lost .
Auto insurance pays for damages, injuries, and other losses specifically covered by your policy. Today, most states require car owners to purchase auto liability insurance, which covers bodily injury and property damage. If you cause an accident, you may be liable for some or all of the damages. When you finance a car, your lender may require that you also carry collision and comprehensive coverage. Collision, as the name suggests, covers your auto when it strikes an object, such as a tree, a telephone pole, or another vehicle. Comprehensive covers your vehicle against other physical damage that is not covered by collision, such as fire damage or theft. Read your policy carefully to know exactly what it covers. Pay special attention to the exclusions section, which lists the things your policy does not cover.
Homeowner’s insurance may not be mandatory in all situations, but it certainly is important. If you are financing your home, your mortgage lender will require you to have homeowner’s insurance. If your house is completely paid for, you still need the protection homeowner’s insurance provides you and your family. You’ll want to purchase enough property coverage to cover the replacement cost of your home and its contents. In addition to protecting your home, the typical homeowner’s policy covers your personal property, both on and off premises. This consists of the contents inside your home, such as furniture, appliances, clothing, and jewelry, as well as outdoors items like sporting equipment and lawn tools. In addition to insuring your property, the typical homeowner’s policy includes liability protection that covers damages caused by your negligence. Medical payments to third parties and your legal costs incurred as a result of any lawsuits brought against you are also covered. Renters need to consider insurance as well. If you lease a house or an apartment, renter’s insurance is available to you. Your landlord probably has coverage, but his insurance covers only the building, not the contents. In the event of a fire or burglary, renter’s insurance will cover your personal possessions. It also covers you against liability claims.
In summary, it is important to have various insurance policies and coverages, however , don’t allow yourself to become insurance rich and dollar poor. Consistently auditing your insurance expenditures will help with your insurance budget and help you with your finances.