Catastrophes arent new. Neither is bad luck. But in the old days when your house burned down, you organized a barn-raising – and slept under the stars for a while. Today, in the age of easy credit and high labor costs, you just go into debt, very deep debt. It all comes down to money: every disaster turns into a financial disaster – unless you have insurance, that is.

Theoretically, insurance should provide you with the money to fix what breaks, and to maintain your lifestyle when your luck goes sour.
Why would someone possibly do this for you? Simple: because you pay them to. And because, if they play their cards right, they can pick up the check on the disasters that occur and still make a profit on the ones that dont.

Choosing the right kinds of insurance, and the correct levels of each one, is an important part of sound financial planning.

There are many kinds of insurance that are sold, and its unlikely that youll need them all. But without the proper insurance, your financial future is in jeopardy. Studies by the non-profit National Insurance Consumer Organization show that nine out of 10 Americans carry the wrong types and amounts of insurance. Be the one in 10 who gets it right.

This post is meant to help you master insurance lingo, understand the different kinds of coverage, and approach the purchase in a logical, clear-headed manner to get the insurance that will benefit you most.

Only sweat the big stuff

Insurance is meant to protect you from the financial consequences of a major catastrophe. Insurance is not there to protect you from lifes little annoyances (a scratched bumper, a leaky faucet, a runny nose). In fact, insurance itself is one of lifes little annoyances. So remember, as youre trying to decide which assets to insure, only worry about the big stuff.
When you consider a certain piece of insurance, ask yourself: Am I risking financial catastrophe by not having this? If the answer is no, then you dont need the insurance.