When you’re trying to manage your money wisely, there are some things that you should never forget to do. Well-known practices include making a budget and setting aside savings—but one of the single most important things you can do to protect yourself is purchase a quality insurance plan.
If you’re trying to cut back on unnecessary expenses, insurance might at first seem like something you could do without. After all, you’re paying each month for something with no immediate benefits. Expert financial advisors agree, though, that having insurance is absolutely crucial.
Disasters can happen to anyone, whether they are car crashes, lawsuits, or even crimes. When problems come, replacing or repairing your belongs on your own or paying other expenses can leave you financially ruined. Insurance is necessary to get through the tough times, and when trouble strikes you’ll be glad you have it. A solid insurance policy isn’t a useless expense—it’s an investment to protect your in emergencies.
Insurance isn’t just a good idea, either. While it makes a lot of financial sense to get some basic coverage, in some cases getting insured is required by law. This is especially the case when it comes to car ownership. Although requirements differ from state to state, you must have a vehicle insurance plan if you want to drive. Since the passage of the Affordable Care Act, health insurance is also required nationwide; most businesses are also subject to commercial insurance requirements.
While you need to make room in your budget for insurance, though, you don’t want to pay too much. The trick is finding the right balance between sufficient coverage and low cost. According to Duke University, here are some of the top tips for figuring out how much insurance you need:
- First, identify your exposures. Figure out what the most valuable items you own are, and what risks they face. Also, determine what changes would occur in your finances if you became incapacitated and could not work.
- Next, evaluate the likelihood of these events occurring. If you live in an extremely dry area, then you might not need a generous flood insurance plan. But if you have a motorcycle that you ride often, you’ll probably want to get insurance for your bike in case of a crash.
- Identify the costs that will result from these disasters. Could you handle them on your own, using your savings or available cash? Or would you need insurance to help pay for everything.
Finding a good provider is one of the most important things you can do when seeking insurance. The right carrier should be able to create a specialized plan that ensures you’re protected without making you pay for policies you don’t need. Plus, finding the right provider can also help protect your budget and keep costs low. Good insurance is an essential part of any personal finance plan.