FLM Step 26: The Debt Advisor on protecting your financial future

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, book author and financial advice columnist Steve Bucci talks about protecting your financial future.

Why Kim asked me to write to you about insurance must be because she doesn’t like me! Just the name can kill a good conversation. “Question: What do you do for a living? Answer: I sell insurance. Response: silence.” You get my drift.

Still, insurance plays an important role in all our lives if we are to be successful; whether we like to admit it or not. And it’s not just Life Insurance anymore. There are other types like, Mortgage Insurance, Pet Insurance, Flood, Home Owners, Renters and of course Auto.

I want to take a minute to talk about two lesser known types: Credit Insurance and ID Theft Insurance.

Credit Insurance: Generally this is insurance that pays your credit card bill if you get disabled, loose your job or buy the farm. You pay a fee base on the balance you have on your card. The devil is, as they say, in the details. If you are unemployed or disabled you may have a waiting period. If you qualify, they may only make you interest payment or a minimum payment that would be spelled out in your policy. Yes, you get a policy and I suggest you read it. I think they write these things on Swiss cheese because they tend to have a lot of holes. My take is that they are not good bets. I’d rather see you take the money you’d spend and add it to your emergency savings account. An emergency savings account can be used for all sorts of emergencies, not just for a credit issue and you are paying money to yourself, not a credit card company.

ID Theft Insurance: This covers some of your expenses in recovering from having your identity stolen. Some ID theft insurance comes with a service that notifies your credit bureaus and lenders; while others have a staff that tries to unravel any mess or phony bills charged in your name or to your accounts by the thief. None of them pay for time lost from work to file documents, make police reports or attend court hearings if you are sued. Identify theft insurance is included in some homeowners policies, comes for free with some credit cards or may be purchased separately.

Steve Bucci is the author of Credit Repair Kit For Dummies, a book in the popular Dummies series that deals with all aspects of credit and how to keep yours healthy. He also is the Debt Advisor for Bankrate.com and answers question through the Advice Team at MoneyManagement.org.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.