five steps: step 4 insure yourself adequately and no more

This is the fourth in an irregular series on the five steps to solid wealth. Step 1 was spending less than you earn, step 2 was paying off consumer debt, step 3 was to grow an emergency savings account. Step 4 is to insure yourself adequately and no more. I'll discuss the areas in which you need to consider insurance below.

The key principle in deciding whether insurance is adequate is to think about the things that you need that you don’t have the resources to replace or fix.

Most people in the beginning or middle of their plan to get rich and end life as a lad/lady of leisure are reliant on income from working (either for themselves or someone else) to not only keep on the plan, but also pay the bills. If you fall into this category, then you probably need to insure yourself against an accident or illness that means that you are unable to work. For this you need income protection and permanent health insurance (also known as short and long term disability insurance)

Anybody with dependents who rely on them for provision of housing, food etc also need to consider having a serious amount life assurance (or life insurance if you’re a Yank). The key word here is rely. If your husband / wife / partner currently earns their own income and you have no children, you probably don’t need major life insurance. On the other hand if you have a non-working spouse / partner you probably need some and if you have children, you probably need a lot.