Carrie Schwab Pomerantz

A young colleague recently mentioned that she had to pay her life insurance premium. She's single, in her 30s with no kids, so I couldn't help but ask her why she needed life insurance. The answer was simply, "well, I've always had it."

This got me thinking about all the potentially confusing choices people make every day regarding the types of insurance they purchase as well as the kinds they don't buy.

Similar to other parts of our financial lives, the world of insurance has become increasingly complicated -- if for no other reason than the vast number of products from which to choose. Because insurance is a key part of every well-thought-out financial plan, it's important to take the time to sort out what you really need. Not everyone requires the same coverage; to a certain extent it depends on your individual situation, both personal and financial. However, I suggest you review these important areas to make certain you're adequately covered.

MUST-HAVES

-- Health insurance: I rarely deal in absolutes, but I make an exception with health insurance. Everyone must have it. Alarmingly, the U.S. Census Bureau reports that close to 46 million Americans are uninsured. According to a 2001 Harvard University study, medical bills were the No. 1 cause of personal bankruptcy.

If you don't have sufficient medical coverage through your employer or another group, you must consider your options. Even the young and healthy can't be complacent. With soaring health care costs, a serious injury or surgery that might require a hospital stay can set you back thousands of dollars. Parents take note: If you have an uninsured 20- or 30-something, what would it cost you to provide them with topnotch medical care in case of a grave illness or accident?

I suggest at least a low-cost, high-deductible policy to cover major expenses. You can also get creative about finding health insurance coverage. Are you part of a professional, educational or religious organization? You may be able to purchase insurance through that group at a lower cost. Even enrolling in a class or two at a community college might qualify you for student health insurance.

-- Car insurance: If you drive a car, you have a responsibility -- to yourself and to others -- to carry some type of insurance. Most states require you to possess at least basic liability insurance to cover damage you may do to others, including both bodily injury and property damage. Liability insurance also pays for potential legal bills.


Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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