Insurance — we know we need it, but what kinds of policies should we purchase? Most of us understand that we need health insurance, vehicle insurance, and life insurance. There are other insurance policies we may need.

The whole purpose of insurance is to protect you from risks that you cannot afford to cover yourself. Consider the following questions:

  • Do you rent your home? Answer yes and you need renter’s insurance. If there is a fire, a flood, or some other calamity that destroys your property, your landlord’s insurance will not cover your possessions. Without renter’s insurance, you will have to pay out of your pocket to repair or replace your property. Can you afford to replace all of your possessions? If not, purchase a renter’s insurance policy.
  • Do you live with others? Do you often have friends over and serve alcohol? Do you have a dog? Do you let other people drive your car that aren’t listed on your vehicle insurance policy? If you answered “Yes” to any of these questions, you need additional personal liability insurance, otherwise known as an umbrella policy. These policies are relatively inexpensive and, when combined with the liability coverage on your vehicle or homeowner’s policies, will protect you in the event that someone is injured on your property or injured because of your property.Think you will be okay without it? Consider this example: You have a friendly medium-sized dog who is very protective of your property. Hence, she will run towards and bark at anyone walking past your home. She doesn’t bite them, she just barks at them. An elderly woman in your neighborhood is walking down the sidewalk as your dog is outside doing her business. She sees the woman and runs toward her, barking loudly. The startled woman falls and breaks her hip. She never fully recovers. Who pays for the damages? Most likely, you do. You may even be sued to compensate the woman for the cost of her future care.

    If you don’t have the extra liability coverage through an umbrella policy, you may lose everything you own and have a future judgment against you.

  • Do you often post negative comments on social media? If the person or company can show they were damaged by your comment, they could win a lawsuit against you. In this situation, simply choosing not to post negative comments will solve this threat of risk and you won’t need additional insurance coverage.

Bottom line: take an honest assessment of your lifestyle and your possessions and decide if you can afford to pay for the worst case scenario. If not, spend the money to purchase the appropriate insurance policy to protect you from the risk of loss. In some situations, such as the negative posts on social media, modifying your behavior will significantly reduce the risk.



Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.

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