The Right Insurance can Provide Emergency Money in Times of Loss
Insurance provides protection
Some consumers try to save emergency money by cutting back on insurance. Though it may be a seemingly logical way to bulk up savings, it is not always a good idea. The purpose of insurance is to protect you. It’s one of the few things you buy and hope you’ll never use. When disaster comes, it’s important to have insurance and have the right type and amount of coverage. Here are some tips on managing insurance.
Who needs insurance
The main purpose of insurance is to replace lost income or pay for needs your family will have if you are no longer around. It may be a morbid topic to consider your own demise, but with a family to protect it’s a necessary move. Some questions everyone, in particular a home’s breadwinner, should consider are:
- Do I need insurance?
- How much insurance do I need?
- What type of insurance should I get?
Taking a look at these questions is the best way to decide what your next move should be. Some people will find that after an assessment, they don’t need insurance. Owen Malcom, VP of Sanders Financial, said, “For someone young and single with no dependents, there is not a need for life insurance.” If, however, you have dependents or share a household, then insurance most likely is a necessity for your family to continue if you are out of the picture.
Finding the right insurance
The best way to find the right insurance is to shop around. The same way you would comparison shop for a car or a flat-screen TV, you should look at insurance. It is a good rule of thumb to talk to three insurance agents and explain your specific needs. If you feel pressured, rushed or guilted into buying more than you need, then leave. There are hundreds of reliable agents who will give you real-life and accurate estimates on what type and how much insurance you need.
When it comes to how much
The best way to figure out how much you need is to look at your situation. If you are the primary wage earner in the family then you have to replace your salary to accommodate your family’s needs if you are gone. You also may want to still have emergency money to provide for college education and mortgage payoffs. Also, it is a good idea to examine your tax situation. In the past, consumers held insurance policies so that estate taxes would not force the liquidation of their properties or assets. Talk with a tax professional to get a picture of what your tax situation would look like to your family if you were out of the picture.
How much insurance to get
When it comes to how much insurance needed, ask yourself “How much would my family need per year if I was not around?” Then figure out how much it would take to bring in that amount with a 5% interest hike every year. Be sure to consider extra family-specific financial goals. For example, if you want to pay off a $300,000 mortgage and still have $100,000 to pay for a child’s college education, it means you should have a policy with a face value of $1.4 million. It is important to set your goals and know what they are when calculating insurance need. Add up anything you want to have financial provisions for and allot for it in your life insurance estimate.
The future with insurance
Insurance is a great way to safeguard your family against financial disaster. If you know what your goals are, you can provide the emergency money needed for your family to pay off a house, maintain a family’s lifestyles, pay for college, provide for disabled loved ones and pay for any other after-care expenses. It’s important to look at your individual situation and find the right insurance product with the right amount of coverage.