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You can mitigate risk and protect yourself financially from unforeseen circumstances by learning your insurance options, having an emergency fund and understanding identity theft as well as other types of fraud.

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To avoid financial catastrophe down the road, insurance options that are worthwhile are those that help protect you and your family from potentially large financial losses. Those include disability, health, property and auto insurance. That is, if something out of the ordinary wrecks your home, say, or affects your health and your ability to do your job, it could have significant financial (not to mention, other) consequences to you and your family. To protect yourself you may transfer risk to an insurer who can agree to take it on, for a fee.

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Having an emergency savings fund to draw on in the event of some unforeseen financial setback, such as a medical emergency or job layoff, is critical, particularly in uncertain economic times. In case you suddenly find yourself without a steady paycheck you will want a source of cash to tap for living expenses so you aren’t forced to rely on a credit card and fall (or go deeper) into debt. You should aim to build an emergency fund equal to approximately the amount of three months to six months of living expenses. So if rent, food, utilities and transportation costs you roughly $2,500 a month, strive to build an emergency fund between $7,500 and $15,000. If you aren’t currently earning a salary because you are starting a business, you’ll need even more. Aim for 12 months to 18 months of living expenses or, roughly, between $30,000 and $45,000, in this example.

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Yes. Homeowners or property insurance is invaluable because you would be liable not only for damage to your property but also for injuries you, your family or pets may cause others on—or even off—your property. Homeowners insurance covers the cost of damage to the interior or exterior of your home, any personal belongings that are harmed in an insured disaster and personal liability for any damage or injuries caused by you, a family member or pet. So if your child shatters a neighbor’s valuable sculpture, you can file a claim to reimburse the neighbor—even if the accident did not occur on your property. Life is full of accidents and mishaps and homeowners insurance is your best guarantee against this unavoidable cost.

A: Yes. Renters insurance can protect your belongings in the case of damage or loss from dangers like fire, theft, vandalism, falling objects, even weather. While your landlord probably has property insurance that covers the physical structure of the building itself, a landlord’s policy won’t protect your personal property (clothes and furniture, for instance) in the event of say, a fire. Relative to other types of coverage, renters insurance is fairly affordable and well worth the peace of mind. Note, however, that there are some events and items renters insurance usually does not cover. Earthquake and flood damage for example, often needs to be covered with another policy or at an extra price. Also if you have very valuable items, like jewelry or fine art, you will need extra coverage.

A: First, check to see if you are eligible under a spouse’s plan. If you are older than 65 or have a disability, you may be eligible for Medicare or Medicaid. If not, consider Consolidated Omnibus Budget Reconciliation Act (COBRA), a federal law that gives workers and their families who lose health benefits the right to continue coverage under their former employer’s group plan for a limited amount of time. You will have to pay your plan’s monthly fees plus what your employer paid but that still may be less than private insurance. You can and should also shop around for other group insurance plans. If your former employer’s plan was particularly expensive, you may find it cheaper to sign up for a private plan, but be sure to research your options thoroughly. Whatever you choose, be sure to get yourself insured promptly, as unpaid medical bills are the leading cause of bankruptcy in the U.S.

A: Anytime you make an investment—whether it’s to buy a house, shares on the stock market or certificates of deposit (CDs)—you are taking a risk. You could lose money if, for example, the value of the stock you own falls. Or you could lose buying power, if the rate of inflation outpaced the return of your CDs. With any investment, there is some element of systemic or market risk, which is anything that affects the overall economy or securities market. Examples of market risk include inflation, interest and foreign-currency rates as well as sociopolitical influences like terrorist attacks. Some investment risk is non-systemic, meaning it is specific to a certain industry, company or product. This could be damage caused by poor management, lawsuits or loan defaults. Risk levels vary across asset classes—stocks, for example, are generally riskier than Treasury bonds—but can be managed by doing thorough research, staying attuned to broader economic developments and diversifying across a range of assets and industries.

A: While death may be the furthest thing from your mind, now is still the time to draft a legal will. Anyone with savings and belongings, however modest, needs to ensure that in the case of sudden death, assets are distributed according to his or her wishes. If someone dies without a will, a probate court decides how the deceased person’s assets should be allocated. The process can take months and doesn’t guarantee that the individual’s estate is properly valued or that all potential beneficiaries are identified. By drafting a will, you can make sure your money and possessions go exactly where you want them to go. A proper will can also speed up the estate-settling process and minimize conflict among your next-of-kin. Most wills are straightforward documents but you should enlist a lawyer to help draft one to make sure your wishes are explicit and will hold up in court.

A: You are right to be concerned. Identity theft—when someone uses your credit card information or Social Security number to open accounts and obtain unauthorized loans—is on the rise. Having your identity stolen is not only emotionally traumatizing, it can do serious harm to your credit score and financial security. Fortunately there are concrete steps you can take to protect yourself. First, be extremely vigilant about giving out your Social Security number and only do so when you are required to. Shred all bills and other documents containing financial and personal information before you throw them away. Whenever possible, pay using a credit card rather than a debit card because credit cards offer more security protections. Change passwords and logins once a month and be careful about what sites you visit and transactions you do online when using a public computer or public wireless network. Also be on the lookout for phishing scams—emails from seemingly legitimate agencies or individuals that request personal information—and wary of how you respond to them. In addition, make a point to carefully review your credit card and bank statements as well as your credit report regularly as those documents are usually the first places where you can spot suspicious activity.

A: Yes. You can recover your good name and standing with lenders but its important to act quickly. Federal laws prevent identity-theft victims from being held responsible for illicit transactions but authorities need to be made aware of the crime right away. As soon as you discover the theft, contact the FTC and local police as well as at least one of the major credit agencies so they can put a fraud alert on your file. If you act quickly, fraudulent purchases made in your name can be easily identified by lenders and, hopefully, will not count against you.

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As the central bank of the United States, the Federal Reserve’s mission is to help provide us all with a safer, more flexible and more stable monetary and financial system. 

The Federal Reserve, often called simply the Fed, conducts the nation’s monetary policy, affecting the interest rates you pay and receive, as well as the economy and job market. 

The Federal Reserve also regulates banking institutions and protects your rights as a credit consumer, maintains the stability of the financial system and provides financial services.  

Provided by MSN Money Fast Answers.