Risk management and insurance is an important part of financial planning, although surprisingly often overlooked. Many feel insurance is boring, complicated or not needed and years of careful financial planning amounts to nothing if a small oversight on your side leads to a financial disaster for you or your family.
Choosing which types of insurance you need, which ones you do not and making sure that the ones you have are still up-to-date and applicable to your current situation can be a bit of challenge though, which is exactly why it is our challenge for today!
An insurance is essentially a financial protection you contract against the risks of a possible loss. Below are the 5 most common types of insurance you might need:
- A life insurance covers others who might financially rely on you for any economic consequences if you were to pass away. This might be your children, your partner or a family member who needs ongoing care.
- A health insurance covers your health bills to ensure you have access to the medical care you and your family need without afterwards being presented with excessive bills to pay.
- A disability insurance provides you with financial compensation in the event of a disability that stops you from going back to work. It covers your future wage by paying a certain percentage of your wage, often around 60-70%, either until you are able to go back to work again or for as long as the policy contracted states that you are entitled to the compensation.
- A home or renter’s insurances covers you against such things as theft or damage, so that if anything happened, you would get financial compensation in order to replace or repair what is needed.
- Car insurance often covers medical and well as property costs after a car accident, both for you and your passengers as well as any third parties involved.
Of course there are many other types of insurance around but many of these you probably never need. That said, everybody’s situation is different so always check this yourself and make your own decisions based on what is best for you and your family.
Today’s challenge is to pull out all your insurance policies, go through them and make sure they are still up to date. If there is anything that needs to be updated, either extended or reduced, make sure to organize this today.
Once you’re done, log in to the Facebook Group or let the rest of us on Twitter know, using #31DayChallengeToFE.
If you want to read more about the various types of insurance, you can find out more in the following 5 Steps of the 100 Steps to Financial Independence: Step 57: Life Insurance, Step 58: Health Insurance. Step 59: Home and Renter’s Insurance, Step 60: Car Insurance, and Step 61: Disability Insurance.