How much insurance do you need?

Insurance is probably one of the most important things that you can get and yet when money gets tight it's probably one of the first things that you think you can do without. It's is basically a gamble, your gambling that if you ever need to replace your car or your home catches on fire you will have a safety net to catch you. The insurance company on the other hand is gambling that you will never actually need to cash in on your policy.

And most people probably never actually do need to cash in on their renters policy, homeowners policy or even their car insurance. But it does give you some peace of mind to know that in your time of greatest need you do have some recourse to fall back on.

So how much coverage do you need? This almost appears to be a loaded question with no standard one-size-fits-all answer. If you have young children living at home you probably realize that you need life insurance. If anything were to ever happen to you physically, you would want to know that your children are taken care of financially.

If you don't have dependents, do you need a life policy? The answer is probably not. It is meant to be a way for your dependents to have a form of income in case something happens to you. You don't have to be a working parent to provide a valuable source of care for your children. If something were to happen to the nonworking parent, the working parent would have to pay someone else to do the same duties that you're doing now, such as day care, cooking and chauffeuring the children around. So make no mistake your services are valuable whether you're paid for them or not. Both parents of small children should have life insurance policies and their spouse named as a beneficiary for their children.

Of course a life policy isn't the only type of policy that most people have. If you're a homeowner or renter you still need to have a policy to protect your property in case of theft or fire. You can also get a policy rider where additional protection against natural disasters, such as floods or earthquakes. Unless you can afford to replace everything you own today it is well worth a small investment to know you can replace everything you own if you needed to.

Finally, most people have some type of car policy which is required by most if not all states to even drive legally. How much you need depends on a variety of things including your driving record and the value of your car. You may feel you don't need very much coverage if your car is an old clunker, on the other hand if you have a brand new car and are still making payments on it you will want to carry enough coverage to pay off your loan in case it is totaled in an accident.