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Insurance is not only a fundamental part of most consumers’ financial lives, it’s also among the most confusing.

Understanding a few of the basics about insurance will prompt you to get the correct insurance or rethink — and reshop for — the insurance you already have.

That’s important because prices can vary widely on the same exact insurance policies, and people often are surprised to learn about what is covered and what’s not only after making a claim.

“There’s a lot of confusion about just what’s in their policies,” said John Egan, managing editor for “Know what you’re paying for.”

Here are answers to basic questions frequently asked by consumers.

Q: How much life insurance do I need?

A:Single, childless people who have nobody relying on their income might decide they need no life insurance.

A single breadwinner in a young family of five might need a policy worth hundreds of thousands of dollars, even millions.

“The amount is really the single-most important thing to get right,” said Byron Udell, founder and CEO of

A rule of thumb is to get term-life insurance equal to about 10 times your annual gross income, but that also could be woefully inadequate, especially if you’re young and your dependents have many years left to rely on your income.

Calculate your own figure at such websites as and

Q: While traveling, should I buy rental-car insurance?

A: Probably not, if you already have auto insurance with collision and comprehensive coverage, which refers to noncollision events, such as theft, fire or vandalism. The rental-car insurance could be a waste of money.

To best answer this question, make two phone calls — to your auto agent and to the issuer of the credit card you will use to pay for the rental. Both are likely to include some coverage for use of a rental car.

Q: How do I choose the right deductibles?

A: The simple answer is to choose auto- and home-insurance deductibles as high as you can stand.

A deductible is the amount of money you have to pay before your insurance kicks in. If you opt for a higher deductible, your premiums will be lower but you’ll have bigger out-of-pocket expenses if you have a claim.

For example, common advice is to increase your auto-insurance deductible from $500 to $1,000, which could mean a 25 percent savings on premiums.

Especially if you have an emergency fund of a few thousand dollars, you should opt for higher deductibles, say, $1,000 on auto and $2,500 on home.

Q: Who needs renters insurance?

A: 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.

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?

A: 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.

To answer more of your insurance questions, go to such sites as, and