|Published: April 2010
by Dave Ramsey
Iíve got auto insurance, but can you tell me what other kinds of insurance are good to have?
The purpose of insurance is to transfer risk. Specifically, Iím talking about risk that you canít afford to take. Most people canít afford to have a heart attack and triple bypass surgery. Having to pay for something like that completely out of pocket would bankrupt just about anyone. Thatís why health insurance is a vital part of any good financial plan.
Itís also important to have auto and homeownerís insurance. If you donít own a home, make sure you have renterís insurance instead. Donít forget about life insurance, either. If youíre married or have kids, you should carry eight to 10 times your yearly income in a good, 15- or 20-year level term life insurance policy. This means if you make $40,000, you should have about $400,000 wrapped up in life insurance.
Long-term disability insurance is vital. The cheapest way to get this is in a group. If you buy it yourself, out on the open market, youíll find that the rates are based more on your occupation than your age or health. So, if you fly a desk, itíll be a lot cheaper than if you work with your hands.
And donít forget long-term care insurance. You need ďnursing home insuranceĒ if youíre 60 or older. It will also take care of you in your own home. The statistical probability of needing it before age 60 is about one percent, so wait until then to buy long-term care insurance. This kind of insurance can make sure you get the kind of care you want in your declining years. Plus, it can keep your nest egg with you and your family and out of the hands of the nursing home!