What kinds of insurance does Dave recommend?

Dear Dave,I've got auto insurance, but can you tell me what other kinds of insurance are good to have?Chris

Dear Chris,The purpose of insurance is to transfer risk. Specifically, I'm talking about risk that you can't afford to take. Most people can't afford to have a heart attack and triple bypass surgery. Having to pay for something like that completely out of pocket would bankrupt just about anyone. That's why health insurance is a vital part of any good financial plan.

It's also important to have auto and homeowner's insurance. If you don't own a home, make sure you have renter's insurance instead. Don't forget about life insurance, either. If you're married or have kids, you should carry eight to 10 times your yearly income in a good, 15- or 20-year level term life insurance policy. This means if you make $40,000, you should have about $400,000 wrapped up in life insurance.

Long-term disability insurance is vital. The cheapest way to get this is in a group. If you buy it yourself, out on the open market, you'll find that the rates are based more on your occupation than your age or health. So, if you fly a desk, it'll be a lot cheaper than if you work with your hands.

And don't forget long-term care insurance. You need "nursing home insurance" if you're 60 or older. It will also take care of you in your own home. The statistical probability of needing it before age 60 is about one percent, so wait until then to buy long-term care insurance. This kind of insurance can make sure you get the kind of care you want in your declining years. Plus, it can keep your nest egg with you and your family and out of the hands of the nursing home!- Dave

Change investing strategy for retirement?

Dear Dave,I'm 10 years away from retirement and just now starting to invest. I know you recommend mutual funds and spreading your money evenly across growth, growth and income, aggressive growth, and international. Considering what's happened with the market recently, should I adopt a more conservative approach?N

Dear N,I don't think so. I think you just need to enjoy this ride the market's on right now, because it's coming back up.

Now, I'm not saying that the market is going to rise dramatically every day. Things just don't work that way. But overall, is the market coming back up? You bet it is! Don't you wish you'd invested $1 million back on March 9? If you had, you'd be sitting on about $2 million right now!

The truth is, I don't know where the bottom is, and neither does anyone else out there. That's why I keep investing with a steady, long-term mindset, and it's what I advise you to do, as well!- Dave