Do you need insurance?

Question Do you need insurance?

Answer Only you can answer that question.

Complete Answer  Your answers to the following questions will help you determine if you need insurance:

 1. What are your financial responsibilities?

  • You are financially responsible for your medical care.
  • Most states will require you to carry automobile liability insurance. Liability insurance covers the medical and property loss and damages you may be responsible for if you cause an accident. Additionally, if you borrow money to purchase as car, as a condition of the loan, the lender may require you to carry collision insurance to pay for damages, including total loss, of the car you have financed.
  • You are responsible for your personal property. As a renter, most landlords will not cover the loss of your personal property caused by a fire or theft.
  • As a home owner, mortgage companies will require you to carry homeowner’s insurance which covers the loss of real property.
  • As a pet owner, your are responsible for the damages or harm your pet may do to others or their property.
  • Your are responsible for the harm you personally do to others or damage to their property.

2. How much of a potential financial loss can you afford? 

You could conceivably insure yourself against every possible kind of financial loss. The cost, however, would be prohibitive. You have to determine how much of a financial loss you could afford and are willing to take the risk.

Examples: I do not need health insurance to cover the cost of a doctor visit for a common cold. On the hand, I am certain that I could not cover the cost of a kidney transplant. I can afford the cost of a new coffee pot if mine wears out. I could not afford to replace all of my personal possessions if they were destroyed by a fire or flood. I probably could afford a new transmission for my car. I could not afford to replace my car if it was totally destroyed in an accident.

A trusted insurance agent could help you determine risks, potential losses and cost of insurance.

Words of Wisdom The best type of insurance is a policy you never use. The worst type of insurance is a policy that you need and don’t have.

If St. Peter calls you home early, will there be enough insurance, money and/or assets in your estate to settle your debts and pay for a proper funeral service? Don’t pass on those financial responsibilities to your loved ones.

Financial Literacy Knowledge/Skill

Determine if and the amount of insurance you may need.

Comments or Questions

Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and/or questions you may have about managing your money (Financial Literacy).

Next week’s topic: Can you insure yourself?

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