Insurance Creates the Roof on Your Personal Financial House

Suzanna De Baca -- Expert Business Source, 4/23/2007 7:19:00 AM

You’ve worked hard to build a good financial foundation for yourself and your family, but have you taken the time to create a solid roof to protect your assets?

In a recent HousingZone University BuildIQ quiz  the editors remind us that, “No matter how good the engineering, design, and materials are, if the framing members aren't installed and connected properly, they won't provide a stable, high-quality roof frame.”

Similarly, you can have a great financial plan but if the elements aren’t coordinated and protected, your economic situation is vulnerable and your financial safety could be in danger.  Insurance is the protection that allows you to preserve what you’ve worked so hard to build.

What types of insurance should individuals have?  Depending on your needs and circumstances, the following are the minimum types of insurance that everyone should own:

Auto Insurance:  You are legally required to have auto insurance, but many people select policies with the lowest deductible in order to cut costs.  Make sure to look at what is covered and get sufficient insurance to prevent the need to use up your savings in the case of a catastrophic accident.

Property:  Homeowners or renters insurance is the first line of defense against your house and personal property, but be careful to make sure that certain possessions are covered by your policy.  Jewelry in excess of a certain amount, farm equipment, and certain recreational vehicles may or not be protected under a basic homeowners policy and may require riders.  Similarly, check to see that you have coverage against certain types of weather or storm damage that may be characteristic in your area.

Life Insurance:  Whether married or single, life insurance can be a powerful tool to protect your finances.  One method of determining how much insurance you need is to look at your annual income and multiply it times the number of years you have until retirement;  that is the amount of income your survivors would need to replace and/or maintain their current living standards if something happened to you. 

Disability Insurance:  Your currrent and future income may be the greatest asset you have during your working years.  If you are disabled by an accident or illness and are unable to work, having enough disability insurance to meet your monthly needs can be a financial lifesaver. 

Long term Care Insurance:  The cost of care in a nursing facility or at home is expensive.  Whether you are young or old, paying for that care can use up precious savings or require the use of assets earmarked for other things.  Long-term care insurance provides payment for these expenses.

Insurance can seem like an unnecessary expense, but having adequate coverage in place can protect your entire financial picture.  Like a roof on a house, insurance can keep your finances from collapsing under pressure or unexpected circumstances.

Suzanna de Baca is President of Private Capital Solutions Group.  She is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667.  Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.