7 Required Types of Insurance7 Required Types of Insurance
Reduce the Risk in Your Financial PlanReduce the Risk in Your Financial Plan
José R. FigueroaJosé R. Figueroa
August, 2013August, 2013
What is the Role of Insurance?What is the Role of Insurance?
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In simple terms, insurance is the tool that is
designed to protect you and your family
against what might happen. When you have
the right level of insurance coverage in place,
you are transferring the risk to another
entity (an insurance provider) and you pay a
premium for that risk transfer.
If you think about it, insurance works like an
umbrella works when it rains. The umbrella
does not stop the rain, but it keeps you from
getting wet. Likewise, having the proper
insurance won’t stop an event, but it will
help you weather the storm and minimize the
impact to your finances.
Let’s talk about the 7 required types of
insurance you need.
1. Home/Renters Insurance1. Home/Renters Insurance
Your home is your most valuable asset so
you need to ensure it is properly covered.
Be sure that you review your policy on a
regular basis so the coverage you have stays
in step with the value of your home.
Another option is to look for a policy that
provides “guaranteed replacement cost”
for your home.
This type of coverage is rare these days but
you should still look for it. If you are
renting, you also need to have the proper
coverage on your assets to cover against the
loss due to theft or fire as an example.
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2. Auto Insurance2. Auto Insurance
You should have both liability
and collision coverage on your
Having at least liability
coverage is a legal requirement
in the U.S.
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3. Health Insurance3. Health Insurance
This is one of the most critical areas to
have the proper coverage. Medical bills
are consistently a leading cause of
personal bankruptcy. In order to save in
your premiums, you can increase your
deductible and/or co-insurance amounts.
You should also evaluate if a Health
Savings Account (HSA) might be a good
option for you. The HSA is a tax-sheltered
savings account for medical expenses that
works with a high deductible insurance
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4. Long Term Disability Insurance4. Long Term Disability Insurance
This is the type of insurance that
would replace your income if you
were to be disabled from working for
an extended period of time.
The best deal in this area is when it
is offered by your employer at a
discounted rate. You need to look for
a policy that is designed to
replace 65% of your income.
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5. Identity Theft Insurance5. Identity Theft Insurance
Identity theft is one of he fastest growing
crimes in the U.S. Over 200 million
people have had their identities
compromised in a data breach since 2005.
The best type of identity theft coverage
not only monitors for identity theft but
also assigns a counselor/specialist to deal
with the restoration services on your
If your identity is stolen, the biggest and
most time-consuming problem is dealing
with creditors to restore your good name.
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6. Life Insurance6. Life Insurance
If you have anyone depending on your
income, you need to make sure they will
be taken care of in case something
happens to you.
The recommended coverage amount is 8
to 10 times your annual income. The
preferred option is to have 20 to
30 year Term Life insurance.
It is a less expensive option than Cash
Value or Universal /Whole Life type of
insurance. The industry is very
competitive so if you are healthy you
should be able to get great coverage for a
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7. Long Term Care Insurance7. Long Term Care Insurance
This is the insurance that would pay for
the expenses in a retirement home, at an
assisted living facility, or for in-home
care. These expenses are very high and if
not covered could quickly eat through
your retirement nest egg.
69% of people over the age of 65 will
require long-term care at some point in
their lives. You should put this insurance
in place for yourself as soon as you
turn 60 years old.
Be sure to include a cost-of living
rider and that the pay-out period is “until
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About the AuthorAbout the Author
José R. Figueroa is a Personal Finance
Coach/Blogger @ Figueroa Financial:
Help and Hope for Your Finances.
He is also the author of the e-books
7 Principles for Financial Success and
Not Mine, Not Yours, But Ours now
available @ Amazon.
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