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Ask Dave

What Insurances Does Dave Recommend?

Chris would like to know what types of insurance Dave recommends, and which ones that he shouldn't fool with.

QUESTION: Chris wants to know what types of insurance are good and what types he should stay away from.

ANSWER: The purpose of insurance is to transfer risk, risk that you can’t afford to take. Having a heart attack and bypass surgery will bankrupt 99% of the people out there. You therefore need health insurance to transfer that risk to a health insurance company. You also need auto insurance and homeowner’s insurance, or renter’s insurance if you don’t own a home. Be sure to have that.

Have life insurance as well. If you are married or have kids, you need to have eight to ten times your income in 15-year or 20-year level term life insurance. It’s absolutely vital to have long term disability insurance, which covers you to age 65 or so if you become disabled. The cheapest way to get that is through a group.

Insurance that you don’t need is cancer insurance, for example. You have health insurance and that covers your cancer bills. Don’t buy accidental death insurance. If you die by accident versus die by disease, you aren’t double dead. Don’t buy return of premium on any type of policy. Never buy whole life insurance policy, cash value or universal life. It’s very expensive and has horrible returns.

You do want to get long term care insurance if you are 60 or older. It’s insurance that takes care of you if you go into a nursing home. Stay away from the gimmick insurance crap.