Rule #1 is don’t lose money, and Rule #2 is don’t forget Rule #1.
That’s a paraphrased version of wisdom that has been popularly attributed to Warren Buffet, who we know is one of the most celebrated investors of our time. When one does the math behind it, the logic is clear.
For example: If you have $1,000 and you lose $200, it means you’ve lost 20% and now have $800. In order to get that money back, you have to gain 25%. After all, going from $800 back up to $1,000 is a bigger percentage difference.
So, losing money can be a bummer. Along those lines, there are times when we can really lose a lot more money. To potentially protect ourselves against many different types of big losses, it can be a good idea to take out insurance.
Here are 5 types of insurance policies that could help protect someone financially:
Try getting a mortgage without insurance! Of course, why would someone want to be uninsured with a house. Imagine a totally unforeseen natural disaster, or fire, just wiping out a home. Who would want to be out the equity and loan balance?
Considering how much money people have invested in a home, the right home insurance policy can be vital – and what’s truly the right policy isn’t universally applicable. For example, a small starter home might have one set of insurance needs, while a massive estate might have different considerations.
If a person driving a car and gets into a collision that involves damages, things can get costly very quickly. Even really good drivers can make a random mistake, and it just takes a short window of opportunity for an accident to occur.
Much like home insurance, there isn’t really a one size fits all approach to car insurance. Different vehicles could command different rates, and where someone lives matters as well. In terms of more controllable decisions, 3 that come to mind are the deductible level, types of coverage included, and actually actively shopping for the best rates.
If someone owns a business, there’s great incentive to make sure that it isn’t impacted by certain events that could be financially crippling. There are some aspects of a business for which it might be possible to obtain coverage. In these cases, commercial insurance is an option that can be explored. Having one’s business income or even viability at risk can be stressful, and the right insurance just might help alleviate certain concerns.
Health care costs can be catastrophically high for many people. Even with insurance, costs can be financially crippling for some people. Without insurance, well, out-of-pockets could quickly drain the resources and net worth of people.
I think most of us know by now that we can’t count on being healthy forever, and that the unexpected can happen. It doesn’t matter if we have a clean health record, rarely get sick, have grandparents that chain-smoked and lived to 100, or whatever. Things happen that we don’t foresee, so it’s best to be prepared with the right policy.
If you have a spouse and kids, would you want to leave them in a lurch if something bad happened to you? While kind of morbid to think about, it’s important to spend time considering what life insurance brings to the table, and what type of policy might provide the best cost-to-coverage tradeoff.
There are other insurance policies to consider as well. Disability, long-term care, liability, and many others come to mind. What matters is to remember that we each have unique needs in the context of our own lives and financial situation.
My Questions for You
Do you pay close attention to your insurance coverage, or is this something you just deal with and forget about?
Are you missing any of the above? Alternatively, are there any other types of coverage that you have?