We have employer-sponsored insurance, specifically: medical, dental, life, and AD&D. The medical and dental are COBRA-eligible. We also have auto, home and umbrella insurance, and will soon be purchasing individual life and disability policies. Additionally, if we lost our jobs, there would be some severance pay or unemployment. We also have a 3-mo. emergency fund. We pay our credit cards off every month. Our mortgage et al. loans account for 22% of our spending. Do we really need this emergency fund? If so, should it be 3-mo. or 6-mo.s? I know 6-mo.s is the recommendation, but I can't think of a situation where we would ever need to tap into it based on all these other sources of coverage. What am I forgetting?
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Yes, you really do need an emergency fund. What if you are terminated from your job? You may think that would never happen, but it does. If you are terminated for just cause, then you don't qualify for unemployment. What if you get transferred 150 miles away and cannot accept that transfer, so you quit or get terminated... again, you won't qualify for unemployment. What if an emergency happens and you do run up the credit card bills because you don't have the money in savings to fix the problem? Currently an 8-12 month emergency fund that covers all monthly expenses is recommended. Insurance isn't going to pay your mortgage and other expenses, and you cannot count on unemployment - so, it will definitely ease your mind knowing that you can easily live for 12 months if something tragic occured.
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