Balancing insurance needs

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"It's a balancing act," Egan said. "You need to make sure your finances are in order so you can handle that higher deductible. Really, it's a gut check."

Q: Should I buy term life insurance or permanent insurance?

In short, buy term life insurance and only buy pricey permanent insurance — whole life, universal life and variable life — if you fully understand the policy, its costs, its rate of return and exactly why you need it instead of term life insurance. That alone will dissuade most people because permanent policies are so complicated.

By contrast, term life insurance is relatively easy to understand. It pays your beneficiaries a lump sum if you die during the term, typically 10, 20 or 30 years. There's no investment component.

Q: Who needs renters insurance?

Renters insurance typically covers your personal belongings against damage and theft and provides some liability coverage if someone is injured in your apartment and sues you.

"If you're a renter and do not have renter's insurance, you're putting yourself at great financial risk," Egan said. "People think, mistakenly so, that their landlord's policy is going to cover belongings. It doesn't."

Fortunately, renters insurance is fairly cheap, often in the ballpark of $16 per month. Yet only 31 percent of renters buy it, according to the Insurance Information Institute.

Q: Should I buy life insurance for a child?

The typical answer is no. Not only is the probability of a child dying remote, but your household doesn't rely on a child's income and would not suffer financially because a child died — outside of funeral and burial expenses.

You could consider a small policy to reimburse yourself for funeral expenses, but get the proper amount of life insurance on the family's breadwinners as a higher priority.

To answer more of your insurance questions, go to such sites as iii.org, insureuonline.org and lifehappens.org.

gkarp@tribune.com

Twitter: @spendingsmart

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