Insurance World

The phrase “car insurance” implies that what you are insuring is your car, but the realities of car insurance are a bit more complex than that. When you purchase a comprehensive auto insurance policy, you are protecting yourself from the costs of damaging your car, but that is just one element that makes up full automobile insurance coverage. You need insurance that can cover the legal fees that may result during a lawsuit if you take another driver to court after an accident. You need insurance that can cover the cost of prescription painkillers that you may need to buy for yourself if an uninsured driver runs a light and hits your car. These and hundreds of other possible costs that have nothing to do with your actual vehicle can be covered by so-called automobile insurance. The act of buying an insurance policy for your car is an act of making sure that it is financially safe both for yourself and for anyone else who you may encounter when you are behind the wheel.

You need to protect yourself from the potential financial hardship of paying for the medical bills of anyone who you injure in an accident, and the costs of repairing any public or private property that you may damage. In addition, before you can hit the road in most states you need enough insurance that you will be able to pay for your own medical care if you are injured in a crash caused by an uninsured motorist. So far, none of these important elements of a standard car insurance policy even mention the automobile itself!

A good collision or comprehensive insurance policy will cover at least some percentage of the cost of repair to your vehicle after physical damage. However, since not every state requires that you have this kind of insurance, don’t assume that physical damage is covered by your policy unless your agent tells you so directly. Physical damage coverage is just one element of a good automobile insurance policy, and many people consider it optional rather than necessary. The actual cost of insuring the physical form of your vehicle is almost always dwarfed by the costs of the other kinds of insurance that you need in order to drive safely, responsibly, and legally.

Other options that you will be likely to encounter when choosing a car insurance policy include things like medical payments coverage, which will help you meet the costs of medical attention after an accident. Of course, a traditional auto insurance policy includes a certain level of protection against the costs of treatment, but things like co-pays are not covered by body injury liability coverage or uninsured motorist coverage. This leads many people to take out additional insurance so that they know that they will not have a larger than necessary financial burden if a hospital stay is necessary for them, for a passenger, or for somebody else harmed during a crash.

Few Americans today would consider owning a home without having insurance. Likewise, car owners will often opt for comprehensive insurance to protect their shiny new vehicle. However, when it comes to life insurance, a surprising number of adults think they do not need it or cannot afford it-but they do and they can. In fact, the monthly premium for a $500,000 life insurance policy may cost about the same amount as one large pizza.

According to Allstate’s 2006 Retirement Reality Check survey, 36 percent of respondents are without life insurance coverage. They claim to be “in the process,” “intending” or “have no plans” to purchase life insurance. This data is further supported in a 2006 study by LIMRA, which revealed that 68 million adults (32 percent) are without life insurance.

Here are some circumstances in which life insurance is necessary-and often vital:

• Others depend on your income. Whether they are children, a spouse or elderly parents, you need life insurance to ensure their future financial security. The mortgage, education costs and day-to-day expenses do not end when you die.

• You manage a household. Even if you do not bring home a paycheck each week, you still make important contributions to your family. Some experts have estimated the annual value of child care, housekeeping, cooking, etc., at about $40,000 a year.

• Your assets will be transferred through a will. Due to a sometimes lengthy probate process, your heirs may need the immediate cash that life insurance proceeds may provide.

• Your assets are subject to estate taxes. Estate taxes may eat up a huge amount of personal assets. Life insurance can provide the liquidity to pay estate taxes and preserve assets for loved ones.

• You own a business. Life insurance can provide surviving partners with the funds to buy out your share.

• Personal responsibility is important to you. Even if you are single with no dependents, you may not want to burden family members with debts or funeral expenses. Also, you could use potential accelerated death benefits to pay bills during a terminal illness.

These scenarios show a few of the many ways that life insurance is invaluable. So when do you need life insurance? Just about always.