“Last year one of our neighbors torched her couch and we had to evacuate the building. It was scary. We didn’t have renter’s insurance before that. It’s a situation that really makes you think, ‘Okay, I really need some sort of safety net.’ ” ~ Aura

Always cover yourself so that accidents, break-ins or natural hazards don’t force you into bankruptcy. The most important insurance products for most people are health, property, life and auto. When buying insurance, be sure you understand your personal and family needs so you don’t buy too much or too little. Examine the deductibles and premiums, and find out if you can combine multiple lines under one insurance company for cost breaks.

It makes no sense to have good finances if you've got no protection in place for the unexpected. Good coverage is like a good bodyguard. It will protect you, but you have to pay. But paying a little is better than being the victim to unpredictable events.

When you get hit, you're usually hit hard. It's not worth the risk.

How to protect yourself

We recommend you carve out the budget to be protected. At a minimum, you want to protect your health, your family (with life insurance), your home and your car (if you have one).

Do this in five basic steps:

• Always have health insurance.

With the rising costs of medical care, even a routine illness or simple injury could leave you with a pile of bills and credit card debt if you’re not insured. Sometimes when you’re young and healthy, you feel indestructible. But there’s no way to predict things like flu epidemics or car accidents, injuries on-the-job or other illnesses that crop up because of our family or medical history.

The bottom line is that health insurance is one of the best investments you can make in protecting your present and your future, so you need to budget in a way that allows for the expense. The first place to look for health insurance options is your employer. Most employers offer affordable programs that you can enroll in. If you don’t get it through your work, you can go online to compare options.

• Shop around and match coverage to your personal needs. 

In addition to health insurance, you want to have auto insurance (required by law in most states, if you drive a car), renter’s insurance (covers you and your property in a rental home), homeowner’s insurance (if you own a home) and life insurance (if anyone depends on you for support).

Insurance is a product, so you want to compare options and make sure you’re picking the right amount of coverage — you don’t want to be under-insured, but you also don’t want to be over-insured and pay too much for coverage you don’t need. You might be able to use one source for all your different insurance policies and also combine family members on these policies. Sometimes, coordinating your insurance accounts can result in better prices.

Here are a few web resources we recommend for shopping around:

• Insurance.com: www.insurance.com
• Insweb: www.insweb.com
• Netquote: www.netquote.com

• Buy life insurance if anyone depends on your income.

If you have a spouse or children depending on your income, then you need to have enough life insurance in place to protect them in the event that you pass away. Not all life insurance is the same, so compare types of policies and levels of coverage to get the policy that is best for you. You also may receive free life insurance benefits through your employer, so you want to look into and take that option if it is available.

• Get your legal documents in order.

At a minimum, you want to make sure you establish your will, your power of attorney and your healthcare power of attorney. Especially if you have a spouse or children depending on your for support, you need to have these minimum protections in place in case of illness or death. The easiest way to do this is to work with a legal professional to draft these documents.

• Prevent identity theft and fraud.

Identity theft can happen when you lose your wallet or it gets stolen, when someone hacks into a company or financial institution where your financial information is stored, when you haven’t secured your online accounts with good passwords or when you’ve thrown away important financial statements without shredding or destroying them first.

Always keep copies of your credit cards and IDs someplace safe. Call your creditors if your cards are stolen or you see strange account activity. If that happens, or your info gets stolen as part of a company’s security breach, make sure you contact the three credit bureaus to put a fraud alert on your account:

• Experian: www.experian.com
• Transunion: www.transunion.com
• Equifax: www.equifax.com

Always shred financial statements before throwing them away. Create online passwords with at least 10 to 12 characters and don’t use each password more than once. We recommend these sources for helping to manage and create strong passwords:

• Keepass: www.keepass.com (manages passwords)
• Lastpass: www.lastpass.com (creates and manages passwords)
• Strong Password Generator: www.strongpasswordgenerator.com (creates passwords)

And get a free credit report once a year from www.annualcreditreport.com to look out for any suspicious activity.

Words to Know

Unsure about something you read? Many of the financial terms you came across in thisUnsure about something you read? Many of the financial terms you came across in this article are defined in our financial glossary. A-Z Glossary

Revisit this Essential during these Life Events

These life events are great chances for you to look at your investments and make sure you’re on track to building wealth for your goals:

• Buying a car
• Buying a home
• Renting a home
• Getting married
• Starting a family
• Coping with death

Next up: Life Events

If you haven’t yet mastered  them, review The Essentials:

1. Spend less than you earn
2. Rule your work life
3. Have an emergency fund
4. Save at least 10%
5. Limit your debt
6. Invest, don't gamble
7. Protect yourself

Then, get help planning ahead for Life Events.