Insurance. We hate it.

People have even compared it to the protection racket–you give

the company your money and it (hopefully) takes care of you when you need it.

Basically, the purpose of all insurance is to protect yourself or your family against the
financial impact of a tragedy. Insurance is not to help you budget moderate-sized
expenses, but to protect you against the truly catastrophic.

There are two ways to buy insurance. One way is to go to an agent to whom you
explain your situation and trust him/her to suggest the insurance that is right
for you. The other is do it on your own. You research the various types of
policies available, decide what you need, and then comparison shop among
the various companies.

The advantage of going to an agent is that an honest and competent one can review
your situation and make suggestions. The advantage of going on your own is that you
usually pay less for the same amount of insurance

STEPS FOR BUYING INSURANCE

Use these three steps when buying insurance:

Step One: Do I need this type of insurance at all? Figure out what the type of insurance
you are considering covers and decide whether you need it.

Step Two: How much of this type of insurance do I need? Policies vary in how much
they cover. Some cover specific dollar amounts. Others cover percent of loss. Some
have a deductible. Others exclude certain types of damage. Look at these differences
among policies and decide which one is for you.

Step Three: Where will I buy it? If you are working on your own, the web has a host of
services to help you comparison shop among companies. Type in "insurance" on most
search engines and you will come up with a number of sites. If you are working with an
agent, you may be working with a captive agent which means (s)he can only sell you
policies form one company or an independent agent which represents several.

When selecting a company, consider also whether the company is both able and willing
to pay on claims should you make one.. AM Best and other companies rate the financial
solvency of insurance companies. The web comparison shopping services usually
include and explain the ratings. You can also ask the company itself or your agent.

Consider also the company's record for trying to refuse to pay claims. Your state
insurance commission may have a record of complaints.

When buying any insurance, you will most likely save money if you pay annually or
semi-annually. Sometimes buying several types of insurance from the same company
will save you money. Often taking steps to make claims more unlikely, such as installing
deadbolt locks or taking a safe driving course will lower your premiums.

When shopping for insurance, also look into group policies offered by alumni
associations, professional associations, or religious bodies. Usually you can forget
about specialized insurance advertised on television with paid endorsers. They usually
cover very little.

HEALTH INSURANCE

Don't go without this. Most people have it at work, but if you don't you will really save big
by going for a group policy. When comparing policies, consider deductibles and what is
or isn't covered. When given a choice, choose one that covers the huge, debilitating
conditions over one that is good about routine immunization, but that balks at the larger,
more expensive claims.

Health insurance comes in three types, though many policies mix and match traits of the
three.

Fee for service, the most expensive, allows you to go to almost any provider and covers
almost anything that is medically necessary. You don't have a primary care physician
who has to approve visits to specialists.

Preferred provider options (PPO's) allow you to self-refer to any provider in the PPO's
list and generally cover a wide variety of services recommenced by those providers.
Some PPO's cover other providers, but with a larger co-payment.

Health maintenance organizations (HMO's) are the least costly, but the most restrictive.
They assign you (or let you select) a primary care physician. That physician acts as
a gatekeeper in that (s)he decides what is medically necessary and when you may see
a specialist. Often the HMO itself has to permit certain treatment and can rule against
your doctor if it thinks the treatment is too costly.

LIFE INSURANCE

For most people, the purpose of life insurance should be to replace the financial
contribution made by a family member.

Life insurance can be pure insurance, which pays only on the death of the insured, or
cash value insurance, which also has a savings vehicle. Most people who need life
insurance are better off with pure insurance and saving for retirement through other
vehicles.

Proceeds from life insurance cover three types of expenses: replacement of the
policyholder's income or work, estate taxes, and burial costs. When you consider the
amount of insurance to buy, consider the following:
1. Most of the life insurance should be on a family member whose salary is important to
the family budget.

2. Consider a relatively small life insurance policy on a stay-at-home parent to cover

child care and other expenses.

3. Don't buy life insurance on children. Instead, buy life insurance on other family
members for the benefit of children.

4. Consider reducing the amount of life insurance you have as you build more financial
assets.

5. Pass on credit life insurance and mortgage life insurance if you can. These plans are
restrictive and expensive. Buy more general life insurance instead if you feel a need.

6. Pass on life insurance altogether if you are single and don't have anyone depending
on you. At most, get a small policy to spare your family burial expenses.

You should buy about 12 times the amount of money you would need annually to
replace what the family member is contributing. For example, if you would need $40,000
a year to replace the death of an employed member, you would need a $480,000
(rounded to $500,000) policy.

AUTO INSURANCE

In most states you are required to have auto insurance and you don't want to be without
it.

Basically, you buy auto insurance for two purposes: to insure against liability you have
to others and to insure against damage that others do to you or your car.

You need to have liability insurance. How much you need depends on how much you
have in assets.

Whether you need insurance to protect your own car depends on your car and how
detesting it would be to replace it.

If your car is expensive and if buying another one would wipe you out financially,
consider buying comprehensive and collision. If you have an older car and wouldn't get
much from the insurance company if it were totaled, don't bother. Instead, put the
money you would have paid for comprehensive and collision toward saving for your next
car.

HOMEOWNERS' INSURANCE
The purpose of homeowners' insurance is to protect you against damage to your home
and property from natural disasters.

Insurance companies offer different ratings of insurance and assign these ratings with
codes starting with the letters "HO". While these ratings are fairly standard, they do vary
a little with companies, so check with the company to see what policies cover.

When comparing policies, consider differences among deductible, coverage of property

other than the house (sheds, garages, etc.), and percent of loss covered. Consider also
whether the policy covers resale cost or rebuilding cost. Rebuilding usually provides
better coverage, but is more expensive.

Basic homeowner's insurance does not cover the contents, though you can often add it
for an additional fee or buy it separately. When buying contents insurance, consider
whether it covers replacement value or fair market value. Replacement value is a better
buy because it pays to buy a new piece of furniture or appliance, not what your old one
is worth.

Consider also buying liability insurance which covers you if someone sustains an injury
or other loss on your property.

Renters and condominium owners need only contents and possibly liability
insurance. Many companies have policies tailored to these purposes.

APPLIANCE PROTECTION

Don't buy any extended warranties or protection plans when you buy small or major
appliances. These plans are pure profit to the appliance stores. That's why the
salespeople, push them so hard, especially if they are on commission. They usually
cover only periods when very little is likely to go wrong and have numerous exclusions.

Insurance is a complex subject. Do your own research or work with your agent.
Hopefully this introduction will help you do that more effectively.