What kinds of insurance should I have?

Dear Dave,

I’ve got auto in suranc e, but can you tell me what other kinds of insurance are good to have? Chris Dear Chris,

The pu rpo se of insurance is to tra nsfer risk that you can’t af ford to take. Most people can’t af ford to have a hea rt at tack and tr iple by pass su rgery. Having to pay for some thi ng like th at comp letel y out of pocket would bankrupt just about anyone. That ’s why health ins ura nc e is a vita l part of an y good financial plan. It’s also im por tant to have auto, which you do, and home - owne r’s insur a nc e, to o. If you don’townahome, makesureyou have renter’s insurance instead. Don’t forget about life insurance, either. If you’re mar ried or have kids, you should carry eight to 10 ti mes your yearly income in a good, 15- or 20 -year level term life insurance polic y. This means if you ma ke $40,000, you should have about $400,000 wrapped up in life insurance. Long- term disability insurance is vital. The che apest way to get this is in a group. If you buy it yourself, out on the open market, you’ll find that the rates are based more on you r occupat ion th an your age or healt h. So, if you fly a desk , it ’ll be a lot cheaper tha n if you work with your hands.

A nd don’t forge t lon g-te r m care in surance. You need “nur s- ing home insura nce” the moment you turn 60. It will also ta ke care of you in you r ow n home. Th e stati stic al probability of needing it before age 60 is about one percent, so I’d wait unt il then to buy long- term care insu rance. Thiskind ofinsuranc ecan make sure you ge t the kind of care you want in your declining years. Plus, it can keep your nest egg wit h you and your family and out of the ha nds of the nursing home! —Dave

Land investment

Dear Dave,

My wif e and I ma ke abou t $85,000 a year. We’re debt- free, and we have no kids. We’d like to start saving money to buy some land in th e near f utu re . What pe rcentage of our savings should we put toward this?

Dennis Dear Dennis,

I don’t know if there’s nece s- sarily a spe cific percent age for th is kind of thing. Sinc e you guys are al ready debt- free you need to ma ke sure that you’ve got a fullyloaded emergency fund of three to si x months of ex penses in place, along with retirement funding. In your case, any thing else you have sit ting around is simply wealth.

If you’ve got $50,00 0 sit ting in asavings account inad di- tion to these thing s, an d you’d rat herhave$50,000 worthof dir t instead of a ban k account , I’m cool with that. It’s really more a matter of ratios tha n percentages. —Dave

For more financial advice, visit daveramsey.com.

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