60-Second Guide To Insurance

Insurance.

Please don't click the "back" button. We know you'd rather talk about defrosting the freezer or your aunt's canine's glandular issues. So let's approach this important topic like we would an old Band-Aid on a hairy arm: Rip it off quick and get it over with already.

Here's a one-minute overview of this most riveting of topics. Please plod on because getting this one money issue right can prevent a lifetime of financial regret.

0:60 Don't buy it
OK, we know that's not necessarily practical. But we do have a general bias. Simply stated, Fools always aim for self-insurance through savings and investment. We prefer to funnel money into our personal savings accounts instead of the insurance company's, whenever it makes sense, and take our chances with small claims, rather than insuring against every unexpected event. Note that we said "aim" because in many cases this just isn't a practical goal. So for the majority of us non-gazillionaires...

0:52 Earn money while on your back!
Over the course of your career, there's a pretty good chance that you won't be able to do your job. Most likely it's because you thought you could make that tackle no problemo. Crack! Yup, that was your Achilles tendon snapping like a KFC wishbone. Better make sure you have some money coming in when your back gives out or your otherwise indisposed. You do that with disability insurance. Many employers provide some coverage, as does the Social Security Administration in some instances. If you decide to go elsewhere for additional long-term coverage (short-term "coverage" would be best in an emergency savings account), hopefully you'll be able to find group rates. If not, here's what to look for in a private disability policy.

0:50 Your money or your life
No one likes to think about death -- unless you believe in an afterlife of eternal foot massages and piles of puppies napping. But you have to consider what will happen to your loved ones if you join that great pedicure parlor in the sky. If folks are depending on your income, then make sure it'll still be there when you aren't. When it comes to life insurance, you have a few choices. For most people, a convertible term life insurance policy is the best way to provide for your family when you're too far underground to do the job.

0:40 Crash, boom, bam
Not only is it unwise to drive without insurance, it's also unlawful. But how much do you really need? Take some time to evaluate what's protecting your wheels. Shave some dollars from your premiums, and buy only what you really need. We'll help you whittle down the list with some cost-cutting ideas.

0:20 Cover your assets
What about your house? Your boat? Your Manolos? Just like TP, insurance can be cheaper when you buy in bulk. See whether you can get a discount for purchasing various types of insurance from the same carrier.

0:10 Don't bother with some insurance plans
In the world of unnecessary insurance products, here are three that you can almost always take off your shopping list: mortgage insurance, insurance on outstanding credit card balances, and flight insurance. Consumer Reports uncovered a host of others that we could live quite happily without. (Of course there are exceptions -- but they are rare.) In most cases, the same coverage is built into your basic life and disability policies. If you've set these up to cover what you can't afford to lose, there's no need to do it again.

There you have it: You've protected your empire from the forces of evil (or just life's random hiccups). You may now return to your cubicle for your co-worker's riveting fridge-defrosting tale.


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