There is a difference between the things we worry about and the things we ought to worry about. I’ve known cigarette smokers who were careful not to eat trans-fats, and a sadly overweight woman who was obsessive about not letting the sun spoil her skin. It’s important to guard against the real risks, and not be side-tracked by relatively trivial fears.
Buying insurance is a similar story. Cancer insurance is an example. Cancer is a hideous scourge, and modern treatments are unbelievably expensive, but it makes sense to have a more general policy. Heart disease is more common than cancer. Stroke and COPD are also major health problems. Better to be insured against a broad range of health problems. In the same way, don’t insure yourself purely against accidental death. What a shame to pay for years, and then find that the insurance doesn’t cover the specific problem you are facing.
Some people buy life insurance on their children. This is exactly backwards. If a child should die, it will be the worst thing the parents ever have to face, but it likely will not be a financial problem. Parents should buy life insurance on themselves, so that the children will always have financial support, no matter what.
The insurance industry will happily sell you insurance on small unlikely risks. They have underwriters whose job is make sure that they come out ahead each time a customer buys one of the minor policies. Don’t insure single possessions whose loss won’t have a real impact on your life. Use care and good sense to safeguard your gadgets, and meditation, prayer, or cognitive therapy to gain peace of mind. You can’t buy it by insuring your contact lenses. The hassle of getting the funds from the insurance company for your cell is often greater than the hassle of buying a new one.
Credit card insurance is a good deal for the credit card companies. Do you want to pay to make sure they get paid? It doesn’t make sense. Mortgage insurance is a similar proposition. Drop it as soon as you can. Pet insurance may be a bad idea. Of course you love your pet, but is your dog going to understand when you put him through some expensive and frightening procedure because you can’t face his passing? Pet insurance encourages this. Wedding insurance is usually wasted. You can insure the wedding, but you can’t insure the relationship. Just plan your day carefully, with back-ups, and accept the imperfections of life.
Your car is a big profit center for the insurance companies. You have liability insurance because it’s the law, and because you’re a responsible person. You may want to insure yourself against irresponsible persons, those uninsured motorists. Do you really need comprehensive insurance on your old beater, though? The insurance company probably won’t give you full value for your totaled car anyway.
Have a savings account to insure against life’s small bumps. Have prudent insurance. Someone with dependents will want to have life insurance, naturally. Wage earners may want to be insured against disability, which can happen to anyone. Health insurance is an obvious need in our society. Lots of these policies are provided by modern employers. Long term care insurance is a good idea, if you can afford it. Insure your house thoroughly, because it’s likely your biggest investment. Renters insurance is a good idea for some. Save for a rainy day.
Don’t throw your money away on insurance you don’t need.