June 30, 2013

The last day of each month is reserved for you and your questions. What financial questions do you have for me?

2 thoughts on “June 30, 2013”

  1. Macala says:

    I see a lot of commercials promoting insurance companies and different ways to “protect” yourself from life’s unseen emergencies. For example, car insurance….. How do I know what is right and how much I need? Obviously, I am not planning on any serious accidents but if one were to happen and it was my fault– I want to be covered…. what if the plan I get doesn’t cover the cost of the accident? I have heard about the 25/50/25 minimum…. What if thats not enough?

  2. Mike Finley says:

    Great question, Macala. First, those commercials are designed to make you fearful so you will come running to them with your money. Don’t fall for it. Two, seek out teachers to further your education on important questions like this. Teachers are people who provide an education without a conflict of interest with the information they are providing.

    Here is a short list of personal finance teachers: Jane Bryant Quinn, Eric Tyson, Jonathon Clements and when it comes to investing your money these three are all you need: John Bogle, William Bernstein and Burton Malkiel. You will find answers to all of your questions as you learn from these teachers. You can see a list of books written by these teachers on this website under the recommended reading tab. Now to your question.

    Most policies provide the minimum required under state law and for many people those numbers are probably appropriate and you will not need more insurance beyond that minimum amount. If you are liable in an accident the other party will seek compensation based on damages and that will usually stop at the upper levels of your coverage. If a person desires to have more coverage beyond those minimum levels there is a inexpensive solution. It’s called umbrella insurance. You can usually pick this up with the insurance company you already have and it will cost very little. It generally covers you up to $1,000,000 and that will do the job in almost all cases. Who needs this? I would recommend you have insurance that covers you at up to 2 times your net worth (net worth statement needs to be completed to know this answer). Example: If you are worth $20,000 then $40,000 will do the job. If you are worth $300,000 then $600,000 would be needed.

    I hope that answered your question, Macala. You can learn more on the topic by going here: http://www.smartmoney.com/plan/insurance/how-to-buy-umbrella-insurance-1304907848431/

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