This is a guest post by Kathryn Vercillo. She has been writing about personal finance topics for over ten years and yet feels like there’s always something more to be learned about how to save money!
The biggest expense that most people have in their lives is their rent or mortgage, followed closely by the amount of money they pay each month for various types of insurance. To reduce your spending, these are two key areas to consider. If you’ve already handled housing, it may be time to reconsider your insurance. Do you really need what you’re paying for?
Let’s look at common types of insurance and whether you really need it:
- Health insurance. People pay a lot of money for health insurance and most of us would agree that it is necessary. The cost of even occasional health care services is so high that most people can’t afford it without insurance. However, you’ll want to look at the type of health insurance you have and see if you really need as much as you are paying for.
For example, you may consider getting a health savings account instead of a traditional health care plan. You pay less for this account and it’s tax deductible. If you rarely use your health care then you may find this type of plan is sufficient and you don’t actually need standard health insurance.
- Auto insurance. If you have a car, you are required to have some type of car insurance. You only need full coverage if you have a car that truly has some value. If your car isn’t worth much, and if you live in an area with low rates of auto theft, you can probably get away with just auto liability insurance. Of course, you might consider giving up your car altogether. Then you don’t need car insurance and you also don’t have the other expenses associated with a car to deal with. Check to see that you’re getting the best rates with NetQuote.com.
- Home or renters’ insurance. As a renter, you probably only need this if you own a lot of items worth value that you are storing on the property. As a homeowner, you’re required to get certain types of home insurance. As a general rule, it is safe for homeowners to choose the minimum insurance required of them.
- Life insurance. There is an easy rule to follow to determine if you need life insurance. You need it if you are financially responsible for others. If your family depends on your income to survive, you should have life insurance to protect them in case you die. Otherwise, you don’t need it. You also don’t need too much. Get enough to cover your funeral costs and your family’s basic anticipated expenses. They don’t need you to be paying now for more than that.
Ron’s Note: I actually advocate everyone having SOME life insurance even if no one is dependent on your income. Funerals and final expenses can be very costly and a minimal term policy is probably cheaper than you think.
- Disability insurance or long term care insurance. People who are elderly and/or people who work in high-risk industries may consider getting disability insurance. It helps pay for things if you become hurt or injured or if you need long-term care. In almost all cases, you will find that these forms of insurance are high-risk, low-reward types of insurance that you probably don’t need.
- Liability insurance. Some professions require that you have liability insurance. Doctors and lawyers are the best examples. Those people need this type of insurance but if it’s not required by your field then you probably don’t need it.
- Extra insurance. Most people will find that they don’t need any other type of insurance than the types mentioned above. Pet insurance, travel insurance and things like this simply aren’t worth their cost for most people. However, you should always look carefully at your own situation with respect to the risks involved in whatever you’re considering insuring and make your decision based on that information.