Essential insurance you can't live without

Cutting back on vacations and entertainment is a wise move when money is tight, but don't be tempted to forego car and homeowners insurance to make ends meet.

Some people appear to be doing just that. Statistics from the Insurance Research Council, for example, indicate 16 percent of American drivers are uninsured. Nearly half of those say the reason is they can't afford insurance. And three out of every five U.S. homes are underinsured, with homeowners skimping by paying less for insurance, but running the risk they won't be able to rebuild their homes if disaster strikes.

You should resist the urge to eliminate car and homeowners insurance in tough times, advises Charles Valinotti, senior vice president with insurer QBE. "Not having insurance may save on premium payments, but it can cost you much more when the unexpected happens," he says. "Insurance premiums are a bargain compared to the financial issues that could pile up if you have an accident, your house burns down or someone is injured on your property."

Valinotti notes the insurance protections you can't do without:

* For your auto - Laws in all states require drivers to either have auto insurance or be able prove they are financially able to pay for an accident. In addition, if you have a loan on your vehicle, your lender typically requires that you carry comprehensive insurance - which covers loss from theft or damage from something other than an accident - as well as collision insurance as part of the loan agreement.

Valinotti says if you don't carry minimum amounts of insurance or can't provide proof of financial responsibility, you might face fines, license suspension or even jail time. "Make sure you know what you need to meet the minimums for auto insurance liability, bodily injury and property damage required in your state."

If your budget allows, consider uninsured and underinsured driver coverage. "In these challenging economic times, chances are you could get hit by a driver who doesn't have insurance," Valinotti says. "If that happens, you need to protect yourself."

* For your home - You can legally own a home without insuring it. But Valinotti says going without insurance is a huge risk you don't want to take, especially in a bad economy. And, if you have a mortgage, your lender will most likely require you to carry insurance - and in some regions, additional flood and earthquake coverage - to protect its investment.

A standard homeowners policy comes with the coverage you need built in: for your home's structure if you need to repair or rebuild it, for your personal belongings if they're stolen or destroyed, for liability protection against lawsuits, and to pay for additional living expenses if you can't live there due to damage from an insured disaster.

Valinotti says instead of thinking of dropping your homeowners insurance, look at ways to lower the cost. "Raise your deductible, or see about getting discounts, such as buying your homeowners and auto insurance from the same company," he says. "You can also keep your premiums in line by reviewing your policies and the value of your possessions at least once a year."

Courtesy of BPT