How to Use Insurance to Protect Your Assets
Insurance is a valuable financial tool to help protect your assets in case of an unforeseen event. Some people think that buying insurance is like playing Blackjack: the house always wins. I'm here to tell you that it's just not true.
It is true that having insurance costs money and you could very well go your entire life without making a single claim. But before you complain about the cost of insurance premiums ask yourself this: can you really afford to replace all of your belongings if you lose them?
Renters insurance to protect your belongings
When I moved away for college into my first apartment my parents made sure I purchased renters insurance. I didn't understand why because I didn't have a lot of belongings, and the items I did have were mostly hand me downs.
I told my parents that I didn't have a lot of valuable personal belongings or a lot of money so I didn't want to buy renters insurance and pay the premiums. My Dad asked "Would you rather pay $25 per month to protect your belongings or pay $1000s to replace them?" I called their insurance company the next day. It was my first exposure to how insurance can protect your assets.
Homeowners insurance for peace of mind
Homeowners insurance is similar to renters insurance in the sense that it covers the cost to replace your possessions if there is a flood, fire or theft. In addition, it also covers the cost of replacement or repair if there is damage the actual structure. This is one of the best ways to protect your assets with insurance, since your home is likely to be one of your biggest purchases.
Could you imagine having damage to your home and not being able to live there if there was a flood or fire? When I was a child, our basement was flooded during a terrible storm and our home insurance policy covered the cost for us (a family of four) to stay in a hotel until the damage was repaired.
Travel insurance to ensure a worry free vacation
If you've ever purchased an airline ticket online or booked a vacation with a travel agent you know they always ask if you want to purchase travel insurance for your trip. The answer should always be yes, unless you have coverage somewhere else such as with your employer benefits or on your credit card.
There are any number of things that can go wrong when travelling: your luggage could get lost, your flights could get delayed, or you could have a medical emergency. If you don't have travel insurance, an emergency while abroad could end up costing more than the vacation itself. It's always better to be safe than it is to be sorry - especially when you're out of province or in a foreign country.
Life insurance to protect your most valuable asset
This is a terrible thing to think about but it's just good financial planning to prepare for the lives after our death. According to MoneySense the average cost of a funeral in Canada is over $6000. Do your loved ones have that kind of money laying around?
On top of the costs of funeral expenses there are also final taxes that have to be filed and outstanding debts that need to be paid. I know it's after the fact, but that seems like a big burden to leave on your family during
their time of grief. Purchasing life insurance can help alleviate all the stress that comes with money after you're gone.
No matter where you are at in your finances or life, insurance can help protect your assets.
Image Courtesy of Twenty20