Navigating Life’s Highways With Adequate Insurance: How To Calculate Your Needs
With adequate insurance, it’s much easier to navigate life’s highways and byways with confidence.
When you know that your insurance company has your back, life’s little setbacks don’t have quite the same impact. But how much coverage will be sufficient for your needs, and how do you go about calculating such things? If you don’t know where to start, you’re in the right place.
How Much Insurance Do You Need for Tangible Assets?
To work out how much insurance you need, you must first put a value on all the things you wish to insure. Ask yourself how much each item is really worth to you. Don’t forget to ask yourself whether you could live without each item, too. If you can easily do without something in your life, there’s no need to insure it.
Once you’ve finished, you should have a list of items that you consider essential to your continued happiness and well-being, with an approximate value for each one. But these are just the tangible assets in your life. What of the intangibles? How can we value them, and is it possible to insure intangible assets?
Intangible Assets: What Are They and How Can You Put a Value on Them?
Intangible assets are any assets that you cannot see, i.e., non-physical assets. Unless you’re independently wealthy, your income is likely to be one of your biggest and most important intangible assets.
Your life is a non-tangible asset and another important one at that! Life insurance in Australia and other countries around the world is a crucial component of many people’s insurance portfolios for this very reason.
If you rely on your income to pay for food, clothing and shelter, it’s definitely an essential intangible asset and one that should be insured.
Putting an insurance value on intangibles is not always easy, as we find out in the next section.
How Much Insurance Do You Need for Intangibles?
Aside from your income, it can be quite difficult to put a cash value on intangible assets.
Consider your life, for example. It’s your most important intangible asset by far, but how much should you insure it for?
Life Insurance
When attempting to put a cash value on your life, consider its value to your dependents rather than yourself.
It’s much easier to calculate an accurate value when taking this approach.
Health Insurance
Good health is certainly an asset and one that’s well worth insuring. When calculating coverage requirements for your health, focus on the potential cost of future medical treatment.
While you could attempt to place a cash value on your good health, such a figure would be arbitrary and of little use.
Budgeting for Your Insurance Needs
Once you know how much coverage you need and which assets you want to insure, approach reputable insurers and request competitive quotations. With comprehensive pricing information to hand, you can then sit down and figure out a budget for all your insurance needs.
If you run into any difficulties with this task, we recommend consulting an independent insurance professional.
