Dave On Insurance

Until you have big, big cash, certain losses could bankrupt you, so wisdom says to transfer the risk.

Basic types of coverage needed: Homeowners or renters insurance, auto insurance, health insurance, disability insurance, long term care insurance (at age 60) and life insurance.

You need about 10 times what your annual need would be if you lost that person. Invested at 10% return, the investment would produce an income to cover the need.

Insurance to avoid: credit life and credit disability, credit card protection, cancer and hospital indemnity, accidental death insurance, any insurance with cash value, investment, or refund, pre-paid burial policies, mortgage life insurance, and kind of duplicate coverage.

It is financial suicide not to have health adn disability insurance. Carefully investigate and understand options so that you know what your coverages are adn then shop around.

If you have an emergency fund, you can raise your auto and homeowner's deductible to $500 or $1,000 and save a bundle on your premium.

Never buy whole life insurance. You pay more than needed to buy death protection, and some of the difference is allocated to a savings program that pays a poor rate of return. Then , when you die, you only get the death benefit; the insurance company KEEPS the "cash value"!!! Universal or variable life insurance is expensive insurance adn a slightly better but still mediocre savings program. Insurance salespeople will push these because the commissions are higher and the company makes more profit.

Buy low-cost level term insurance for 10 to 20 years (guaranteed renewable). The premium for level term will run as much as 70% less than whole or universal life. Then invest the difference in a forced savings program for a Roth IRA in a mutual fund that averages a 12% annual return.

NEVER buy credit life or mortgage life insurance. These are designed to pay off your mortgage or loan if you die. The typical credit life policy is 90 to 200 times more expensive than level term. You can usually buy a level term policy of the same face amount for less than half the cost of mortgage life insurance. The lender may require that you have insurance but cannot require that you buy it from him. DON'T buy insurance from a lender.