Dave Ramsey Says These 8 Types of Insurance are Crucial to Protecting Your Family and Finances
- Complying with laws isn’t the only reason to buy insurance.
- Ramsey has provided advice on crucial types of insurance consumers need.
- Having home, auto, and several other kinds of coverage like long-term care can help prevent financial disaster.
How many of these types of insurance coverage do you have?
Most people know they need certain kinds of insurance protection in place, such as home insurance and auto insurance. These kinds of coverage can be required by law or by lenders on mortgages and car loans, so few go without them.
The reality, however, is there are actually many different kinds of insurance that could be important to provide appropriate asset protection.
In fact, finance expert Dave Ramsey has identified eight crucial types of insurance that consumers shouldn't go without. Here's what they are.
1. Term life insurance
Ramsey has indicated this type of insurance may be the most essential of all. "If there’s only one type of insurance you sign up for after reading this, make it term life insurance," his blog reads.
Life insurance pays out a death benefit after the policyholder's death. Without it, loved ones could end up in dire financial straits without the income or services the deceased previously provided. Ramsey recommends buying a policy that replaces 10 to 12 times annual income in order to make sure that survivors can make ends meet.
2. Car insurance
As Ramsey points out, complying with the law isn't the only reason to buy car insurance. Even minor fender bender accidents could cost thousands of dollars and no one wants to be left unable to pay off a car loan, or to repair or replace a car, after something goes wrong.
On his blog, Ramsey recommends making sure to purchase liability coverage to pay for losses caused to others, as well as collision and comprehensive coverage that will pay out if something goes wrong with the policyholder's own vehicle.
3. Homeowners or renters insurance
Home and renters insurance pays for the physical structure of a property (for homeowners), as well as possessions within it (for both homeowners and renters). This kind of policy also pays out if someone is injured on the property and the policyholder is held responsible. Ramsey has indicated these protections are crucial to protect assets and avoid financial disaster if something happens at home.
On his blog, the finance guru also suggests looking into flood, hurricane, and earthquake insurance, as sometimes damage from these losses isn't covered by a standard policy.
4. Health insurance
Ramsey has described health insurance as "another super important type of insurance you can't go without," and for obvious reasons. A single medical emergency could lead to huge medical bills that are difficult or impossible to pay. No one wants to be forced to choose between their physical and financial health, and the right coverage can help ensure that doesn't happen.
5. Long-term disability insurance
Long-term disability insurance kicks in and replaces income if a disabling condition makes work impossible. As Ramsey explains, one in four of today’s 20-year-olds will become disabled prior to age 67. Long-term disability insurance could be a crucial income source if that occurs.
6. Long-term care insurance
Long-term care insurance pays for nursing home and home care in the event it becomes necessary. Ramsey recommends putting this protection in place at age 60 to ensure huge care bills don't result in financial devastation in retirement.
7. Identity theft protection
Identity theft insurance is another kind of coverage Ramsey says should be purchased. This type of policy helps consumers clean up fraud situations if needed. There is, however, more controversy about whether this policy is actually worth buying so be sure that any policy purchased really justifies the premiums.
8. Umbrella policy
Finally, an umbrella policy supplements other coverage and pays out for additional losses after a home or auto policy is exhausted. Buying this kind of protection is important for those with significant assets to protect.
Consumers should research each of these eight coverage types and carefully consider whether it's smart to follow Ramsey's advice and put each of them into place.
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