Insurance can be so daunting! I come from an entire family of people in the insurance business, and even so, I find myself getting overwhelmed when it comes to figuring it all out. There are so many different types of insurance, it’s hard to know which ones are critical, and which ones you can do without.
This week, Dave walks us through the seven types of insurance that every adult needs, and helps reveal some of the traps within the insurance industry. Dave teaches us that the main purpose of having insurance is to protect against those emergencies that you can’t handle on your own.
Here are the seven types of insurance that Dave says we must have:
1. Auto Insurance
2. Homeowner’s and Renter’s Insurance
3. Health Insurance
4. Disability Insurance: this type of insurance is designed to replace your income lost due to a disability. Dave recommends buying long-term disability (rather than short-term disability) insurance.
5. Long-Term Care Insurance: this insurance is for nursing homes, assisted living facilities, and in home care. If you are over 60 years old, definitely consider getting this insurance.
6. Identity Theft Protection: make sure your protection not only provides credit report monitoring, but also includes restoration services.
7. Life Insurance: there are two types of life insurance, term insurance and cash value insurance. Dave recommends buying term insurance (which is only for a specified period and is substantially cheaper). Instead of paying a lot of money on a permanent cash value insurance policy, invest that money instead. Down the road, it will be worth much more than that life insurance policy.
As for the insurance to avoid? Credit life and disability insurance, cancer and hospital indemnity insurance, accidental death insurance, pre-paid burial policies, mortgage life insurance, and policies with fancy options.
There’s a lot of information out there! If you’re struggling to sort through it all, feel free to ask questions in the comments below. If you’re looking for additional resources regarding insurance, Dave Ramsey has a number of articles and tools on his website.
Action Items This Week:
Identify your insurance coverages: Use the Insurance Coverage Recap form in your workbook or online here to list the policies you currently have. Note any of Dave’s recommended seven basic types of coverage that are missing from your list as well as any policies that you need to update or remove. Make sure your spouse or any dependents know where to find this form in the event of an emergency.
Discuss the Insurance Coverage Recap form: Review with your accountability partner or spouse and discuss any changes that need to be made.
Adjust your zero-based budget: if you’ve changed or added any insurance policies, be sure to make the necessary updates to your monthly budget.
- We just watched a powerful, sobering story about why having the right kind of life insurance is so important. Take a few minutes to respond to the Steve Maness story. What, if anything, does this inspire you to do regarding your own insurance plans?
- Having the correct types of insurance is vital to the physical and emotional health of your family. What would happen to you and your family if a catastrophic event happened and you had no or insufficient insurance coverage in one of the key areas of insurance?