Insurance Options

The best way to avoid financial catastrophe down the road is to know your options to insure yourself now.

It's not the small risks in life that can push you over the edge financially — it's the big ones you need to protect against. If something out of the ordinary wrecks your home or affects your health and your ability to do your job, it can result in potentially large financial (not to mention, other) losses to you and your family. To protect yourself you can transfer significant financial risk to an insurer who will agree to take it on, for a fee. Types of insurance to consider are disability, health, property and auto.

Disability insurance covers you if an illness or ailment prevents you from doing your work and earning your income. While the government does provide a safety net for some kinds of disabilities, even if you qualify, it can take months to kick in. Since fewer employers offer disability insurance — and the numbers of self-employed and unemployed workers are so high these days — it’s critical to be sure you’re covered. This Wall Street Journal article is a good starting point to learn about disability insurance, as is this Bankrate primer; the blog Get Rich Slowly walks you through the process.

Health insurance is a hot topic nowadays. Unfortunately many people, even those who can afford it, go without. Young people, in particular, are guilty of this: Twenty-somethings make up nearly one-third of all of America’s health uninsured. What so many people are overlooking is that huge medical bills are the leading cause of bankruptcy. This resource from Junior Achievement/American Express Personal Finance Center walks you through the considerations when choosing health insurance. This U.S. Department of Health and Human Services site on Choosing a Health Plan is helpful as well.

Property insurance is also vital for financial security. The result of paying for coverage can be priceless, as without it you’re liable – not only for damage to your property but also for injuries others receive on your property or injuries you, your family members or pets inflict off your property. This Investopedia’s Beginner’s Guide to Homeowner’s Insurance is a good first step. Renter’s insurance covers your goods if you’re a renter and also gives you liability coverage. This MoneyCentral.MSN.com Money in Your 20s Web page provides additional information on the topic.

Auto insurance is usually the easiest kind of insurance to understand. It covers property damage, liability and medical costs. There are six different kinds of coverage and requirements vary state by state; About.com Personal Insurance gives information to see what your state requires. Kiplinger Auto Insurance Tutorial can help you figure out what you’ll need to be protected. For more comprehensive coverage of the topic, review these Insurance Information Institute Auto Insurance articles.

What about life insurance? If you’re older and have to provide for other people after you’re gone, you should consider life insurance. If you’re younger, still in your prime earning years and fairly far from retirement age, it doesn’t have to be top of your mind.