Learn how to buy insurance correctly to avoid being fooled.

When a young person starts earning, the first step into financial adulthood should be to get insured. However, to do this correctly one needs to understand what insurance really is and how much one actually needs.

Let’s look at the dictionary definition of insurance: an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death .

Any product or service that does not fit this is not insurance, even if it is being sold by an insurance company. Remember that much of what agents try to sell you is not insurance.

How much should you be insured for? There are a variety of ways to arrive upon the answer, but a starting point could be 10 years worth of your current income. This will vary according to other family members’ income, assets, house etc, but rarely would an amount less than 10 years’ income suffice.

Leave a Reply

Your email address will not be published. Required fields are marked *