Insurance is an important element of any sound financial plan. Different types of insurance protect you and your loved ones in different ways against the cost of accidents, illness, disability, and death.
The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, no one-size-fits-all policy. Life insurance, for example, is a virtual necessity if you have a spouse and children, but perhaps is less important for a single person. Disability insurance, which provides an income stream if you are unable to work, is important for everyone.
Life Insurance
Life insurance, payable when you die, can provide a surviving spouse, children, and other dependents with the funds necessary to maintain their standards of living, can help repay debt, and can fund education tuition costs. The amount you need depends on your situation. If you make $100,000 a year, have a sizable mortgage, and have two kids headed to an expensive college, you could need $1 million in coverage.
Value-accumulating, but commission-heavy, whole life or universal insurance is often sold as a conservative savings vehicle.
Talk with an insurance agent who offers policies from companies whose financial strength is ranked high by rating agencies. And remember that you can shop around.
Health Insurance
Most people enjoy medical insurance as an employee benefit, often with their employers paying whole or part of the premiums. Many employers offer a choice between HMOs (health maintenance organizations) and traditional fee-for-service care. Rates for HMOs are usually cheaper but have more constraints. Privately purchased health insurance is much more expensive -- often by several hundred dollars a month -- depending on such things as deductibles, coverage choices, and location.
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