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Insurance is a necessity for the financial protection of your family. You work hard to establish a financial foundation and it can be wiped out instantly with an auto accident, an injury, a fire or tornado. Review your insurance each year. Your coverage should change as your family and possessions change. Coverage should include life, homeowners/renters, disability, auto, health, and possibly an umbrella policy. If you live in an area with the risk of natural disasters like flood, earthquake or a hurricane, get extra coverage for this.

Life Insurance
Don’t skimp on life insurance. Even if you have insurance through work, it may not be enough to cover the needs of your family. If you have children, the absolute minimum coverage should be $500,000. It is a good idea to carry term life insurance that is 6-8 times your annual income plus enough to pay off household/credit card/other debt, mortgage, college tuition, funeral costs and care for others who are dependent on you.

Premiums are determined by several factors: age (the younger you are, the lower your premium), sex, weight, health, health history, driving record, even hobbies. Good health and good lifestyle will get you the lowest rates. Expect to pay more if you smoke, have a chronic disease, or your family has a history of heart disease. You will have to take a medical exam, so the time to buy life is insurance is when you are healthy, not when you have a pre-existing condition.

Have your new policy in place before you drop your old policy. Verify how long the premium is guaranteed.

Term- Simple life insurance that is the easiest to get. Most cost efficient for the average family. It insures your life for a specified number of years. It is the least expensive because it leaves you with nothing if it expires before you do. Premiums increase at stated intervals as you get older. Protects you up to age 70. Most people should get term insurance.

Whole Life- Most expensive. Guaranteed death benefits, guaranteed interest earned, fixed sum payments to heirs after your death. Accumulates cash value which you can borrow against. Pays dividends that can be applied against future payments. Be cautious about choosing whole life insurance. Since it is expensive, you might not be able to afford enough to be fully insured. Whole life also carries a high commission on your investments. Rate of return is typically 4-5%. Over time, conservative mutual funds can provide better returns with lower fees. If you keep the policy over 20 years or you don’t have the discipline to save and invest on your own, it might be a good deal.

Disability Insurance- Often overlooked, but also a necessity for your family to be fully protected if something happens to the breadwinner and savings won’t sustain your family. You have a greater risk of disability than early death. Many employers offer it. The premium is typically 1-3% of your annual salary and it pays 60-70% of former salary, collectible 3-6 months after you have been disabled. It pays continuously for several years or until retirement.

Home Insurance
Lenders require that homeowners get insurance. However, this is just enough to cover the lender’s exposure. This amount may not fully protect your home and belongings.

Insure your dwelling and contents for their replacement value and an automatic adjustment for inflation. You will need supplemental coverage if you have antiques, expensive jewelry or other valuables. Also get additional insurance if you have a home office with expensive equipment. It is a good idea to have a video of your possessions and serial numbers of the high-end items. You do not need to insure the land.

Save money by setting a high deductible. $1,000 deductible can save as much as 20-30% on your premium.

Insurance companies do look at your record of past claims. If you have a history of small claims, they might not insure you. Insurers have also begun avoiding homes that have had a claim with even minor damage. Take care of minor problems and repairs yourself. Avoid notifying your insurer of a problem unless you are filing a claim. Keep on top of home repairs, especially water damage.

Floods are not covered by homeowners insurance. If you live in a flood plain, get flood coverage through the National Flood Insurance Program.

If you live in a high-risk area like California or the Coasts, get earthquake or hurricane insurance. These are not covered by your homeowner’s insurance.

Extra risk features such as a swimming pool or using your property for rental can raise rates.

Renter’s Insurance
Even if you are single and have minimal furnishings in your apartment, you should get renter’s insurance. Your landlord’s policy probably covers his property only, not yours. It costs approximately $150 per year for $30,0000 worth of property damage. There are two types:

1) Cash Value–replaces the value of the item at the time it was lost
2) Replacement Value–the amount it would take to replace an item with a new one

Automobile Insurance
Each state requires drivers to carry auto insurance. It is a very good idea to get more coverage than the minimum mandated by your state. Suggested minimum coverage is $100,000/person, $100,000/property and $300,000/accident. If you can afford more, get as much as you can afford for bodily injury and personal liability

Compare rates for auto insurance each year. Take a higher deductible and save 20%-30% on your premium. You can also save money with a multi-car discount and by purchasing a safe car loaded with safety features like airbags, anti-lock breaks, daytime running lights and a good vehicle injury rating.

If you have changed to a job that is closer to your home or started working from your home, notify your insurer to decrease your premium.

Most policies cover rental cars.
Umbrella Coverage- It is a good idea to get $1 million in umbrella liability insurance. If you have a high income, get more. Provides additional insurance and additional coverage with relatively little cost. Its coverage begins when your auto or homeowner’s coverage ends.

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