Health insurance is a necessity as many health care costs are completely unaffordable. A heart transplant could cost over $1 million. Furthermore, beyond the expected payout, managed care policies such as PPOs and HMOs also offer lower contracted rates with health-care providers. Thus even a multi-millionaire could benefit by having health insurance since it is really a combination of insurance and discounted rates.

Start with your total expected earnings over your career. For example, a 35-year·old earning an after-tax income of $100,000 with 3% annual increases, would expect earnings of around $4.75 million over the next 30 years. But that doesn't have to equate to needing that much life and disability insurance. Don’t necessarily use a rule of thumb such as 10 years of income when determining the amount of insurance. The key is to protect your family’s lifestyle.

Insurance can seem boring, but at the same time it is important, complex and the cost of premiums adds up quickly. Even though there is a bit of standardization among policies and insurance companies, typically policies are difficult to compare, and normally have many exclusions and complex terms. Another important consideration is the financial stability of the insurance company. Also it normally is not cost effective to switch a single policy to another insurance company, as insurance companies often offer discounts for bundled policies such as auto, property and life.

As you age, you should be converting your earnings to financial assets. You likely own larger homes and have investment portfolios that you want to protect against disasters and lawsuits. If your home burns down, or if you injure or kill someone in an automobile accident, a lifetime of wealth accumulation could easily be wiped out. Therefore having the right insurance can help to protect valuable assets.