Insurance: What You Do and Don't Need

Health, life, travel, home -- when it comes to purchasing insurance it seems as if there's something out there to cover almost any need from a sprained ankle to lost luggage.

"Good Morning America's" financial contributor, Mellody Hobson, makes purchasing insurance for women easy, cutting through the financial jargon to bring you clear and simple advice on what kind of insurance coverage women need and why.

Life Insurance

As a rule of thumb, Hobson said that all women should have life insurance because it ensures that when you die, your debts will be covered and your dependents will have the financial resources to run the household without you.

"The standard recommendation is for people -- no matter a man or a woman -- to have coverage of five to 10 times your annual gross salary," Hobson said on "GMA".

The only people Hobson suggests take a pass on life insurance are single women without dependents.

When it comes to choosing between types of life insurance -- term or permanent -- the best way to evaluate your decision is to look at your current financial expenses.

"Think of term and permanent insurance as you would the difference between renting and buying a home," said Hobson.

"With term insurance, similar to a renter, you pay for something that ultimately is not your own. Likewise, permanent insurance is similar to taking on a mortgage of a home, which will ultimately be yours. After you complete the final premium prepayment, the permanent policy, with its "cash value," is yours. Term insurance can be seen as a cushion for what you have not been able to accumulate."

Term insurance is the way to go for women who have to take mortgage payments or tuition bills into account.

Hobson also reminded viewers that women should not assume that they can rely on their husband's life insurance.

"Permanent insurance is not always a financial lifesaver," Hobson said. "It is essential for married women to invest alongside their spouse and save for their own retirement in a spousal IRA."

Health Insurance

"Health insurance is the most critical area of coverage for all women," said Hobson.

She advises women who are unemployed or are not covered by their husband's policy to either purchase private insurance or call the office of their state representative to find out what type of coverage options are available from their state.

Homeowners or Renters Insurance Homeowners or renters insurance is a must -- Hobson advised.

"If you live in a condominium or rent an apartment, your landlord's or condo association's insurance should cover damages to the building -- meaning the structure itself. But such a policy only covers their building and not your belongings," said Hobson.

Having home or renter's insurance provides coverage for liabilities like someone falling on your front step or breaking something in your apartment.

Renter's insurance is also relatively inexpensive. For as low as $150 to $300 a year, you get sufficient liability and property coverage.

Auto Insurance

Even though it's mandatory for all drivers to have auto insurance, women have an advantage when it comes to getting lower rates.

"Go online, scour the Yellow Pages, ask around -- do whatever you can to find the most reasonable rates," Hobson advises.

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