For many people, the purchase of insurance is a “necessary evil”. It is something they know they need, but they don’t really want to think about it and they really don’t want to spend “too much” money on it. This leads to the all too common problem of spending more than enough for insurance and still not getting proper coverage. Insurance and Risk Management is not rocket science, but there are a few basic rules to follow in order to get the most “bang for your buck” on insurance purchases.
Rule One- Don’t risk more than you can afford to lose.
This is the first and most important rule. The primary purpose of insurance is to protect you from catastrophic loss. If you are looking to reduce your insurance premiums, don’t do it by reducing or eliminating coverage on an exposure that could financially bankrupt your family if it were to occur. Following this rule would dictate purchasing enough liability protection to cover your assets in the event of a lawsuit and having enough life insurance to take care of your family in the event of the breadwinners untimely passing. Disability and Long Term Care insurance are two other types of insurance that could help you deal with a very severe hardship. However, Disability and Long Term Care, along with Life insurance are forms not everybody will need. Before purchasing these lines of insurance, check with your trusted agent, as to whether, in your particular financial situation, you need a certain type of insurance. Beware of any agent that always touts a particular type of insurance without first questioning you about your own financial situation.