A Brief Overview of Insurance

Personal insurance is an essential part of overall financial planning. Insurance is a way to reduce risk and protect things that we value. Unfortunately, the word "insurance" usually creates red flags in the minds of people when the subject is raised.

Insurance has left a bad taste in the mouths of many consumers. This is the fault of the insurance industry itself. Overzealous insurance agents, focused on their own goals and not the needs of the consumer, have damaged the reputation of what is a very useful product. As consumers we must also bear a certain part of the blame for not being informed and educated.

A dizzying array of available insurance products adds to the confusion. Each of these products has a specific use. It is up to us, the consumers, to become educated about insurance, so that we can make the right choices. The relationship between the consumer and the insurance agent need not be an adversarial one if both are educated about insurance products and their uses.

Before we take a look at the various products available to us, we must consider our rights as consumers. First, we must not allow ourselves to pushed into decisions until we know all the facts. Ask questions. A good insurance agent, particularly a full service financial planner who is licensed to provide a wide range of products, will be able answer all of your questions. This person is in the business of helping you plan your financial future. As a consumer it is your responsibility to shop for a financial planner that is best for you.

When people think of insurance, they usually think of life insurance. The purpose of life insurance is to create an instant estate in case of your death. However, life insurance products have come a long way in the last twenty years. You now have a number of products available to you. There are also some that provide investment options.

Health insurance protects you in case of illness or injury. One catastrophic illness or injury can financially destroy you. Many people receive subsidized health care benefits through their jobs. You can also purchase it on an individual basis, but it is expensive. So many Americans are without health care insurance in the face of rising medical costs that universal health care insurance is now a hot political topic.

The fastest growing type of insurance is long-term care insurance. This is no doubt due to the fact that the oldest baby boomers are now in their sixties and approaching retirement. This type of insurance is designed to help pay for nursing home care services or other home health care expenses. Some plans even subsidize nursing home care expenses. This insurance can help protect your assets against the high cost of long-term care. It also helps reduce the financial burden your long-term care can place on your family.

Disability insurance replaces a part of your income if you can't work because of illness or injury. Disability policies generally replace somewhere between 60% to 80% of your income. You may also be eligible for Social Security benefits or Workers Compensation benefits if you become disabled. Your employer may also provide or make available disability policies. This type of insurance is the most overlooked insurance in our financial planning. This is probably due to the fact we perceive ourselves as "bullet proof" when we are young, working-age individuals.

Most of us are familiar with auto insurance. It is a very competitive industry. This benefits consumers with lower prices. Most states now require full coverage auto insurance when you purchase a car. Auto insurance usually insures both your vehicle and you. If you own your vehicle outright without any liens, then you may opt for less coverage of certain items. However, most states still require that you maintain basic liability coverage. This is a wise move anyway since you want to protect yourself against any lawsuits that may be filed against you as the result of any accident.

Homeowners insurance protects the investment you have in your home. Be sure to carefully read your policy. It should provide compensation for any damages to your home and its contents. It is also a good idea to add liability coverage as part of your policy. This protects you from financial liability if someone is injured on your property. There may be limits to the type of coverage that is available to you in your area. For example, insurance companies will not provide coverage for some areas of the country if a flood occurs. If they do offer coverage for occurrences such as flood, the premiums may be significant. Again, be sure and ask questions.

There are also a myriad of other insurance coverage available such as condominium insurance, renters insurance, valuable property insurance, excess liability insurance that covers you in case a judgment against you exceeds the liability limits of your auto or home insurance policy, home business insurance if you are self-employed and work from your home, and loan related insurance such as credit life or disability insurance that is tied to a specific loan.

A full service financial planner will be able to give you advice on which insurance is best for you for your particular circumstance. In the final analysis, it is our responsibility as consumers to do our homework so that we can make the best choices for us. No one else knows us and our needs as well as we do.