Is Insurance Worth It? How to Buy Only What You Need
Is insurance worth it? You might have asked yourself this question multiple times. It’s hard not to question the necessity of your insurance when premiums are deducted from your account each month. While some types of insurance are unavoidable, you probably have at least some options to reduce your insurance costs. So, what insurance do you really need, and what’s just a waste of your money? The answer could depend on your circumstances, but there are some general guidelines you can follow.
Is Insurance Worth It? Minimum Insurance Requirements
Unfortunately, there are certain kinds of insurance you can’t cut out completely.
For example, there are minimum car insurance requirements if you want to be allowed to legally operate a vehicle on the roads.
Similarly, you might have a contractual obligation to take out homeowner’s insurance if you’re still paying off your mortgage.
While the obligation for minimum insurance can feel like a headache, it’s a positive thing. Insurance cover protects you when unfortunate incidents happen. There’s nothing worse than loss or damage to property when you have no means to pay for it.
In some cases, your insurance provider might also help to defend you legally. Especially if someone tries to claim against you unrightfully.
So yes, paying insurance each month without getting anything back isn’t pleasant. But having at least the minimum cover can be a huge relief if anything bad ever happens to you.
How Much Insurance Do You Need?
A lot of people mistakenly believe that fulfilling minimum insurance requirements is worth it. In many states, however, the minimal legal car insurance isn’t nearly enough. Too many people believe they have adequate cover, only to find out their cover is lacking after an incident occurs.
Know Your Cover
If there’s one lesson everyone can learn, it’s that you must know what your cover is – no matter how much cover you have. At least that way, you won’t get a nasty surprise when something bad does happen. Don’t assume your state minimum car insurance requirements, or the obligatory cover for your mortgage contract have you covered.
Check up on your car, home and life insurance cover yourself. Be sure to ask about your deductible. An insurance deductible is an amount you’d have to pay out of pocket before you can claim for anything, so your deductible should be an amount you can afford to pay.
Furthermore, you have to know what kind of things you’re covered for. Once again, this is an area where a lot of people get confused. There are different kinds of insurance cover for different kinds of incidents. Standard insurance policies won’t always payout for any kind of mishap.
To get additional cover for different situations, normally requires that you take outriders on your policy.
Is Life Insurance Worth It?
Term life insurance is a common type of insurance that typically expires after a set amount of time. What this means, is that loved ones of the insured can only claim on the policy if the insured was still below a certain age at their time of death.
Many people question the necessity for term life insurance. After all, if you don’t claim, you’ll effectively have wasted all the money you ever paid in premiums. Seeing as life insurance isn’t a legal requirement, it’s also the easiest cover to cut when financial times get tough.
Despite this, you might still be under a contractual obligation to have a life insurance policy if you’re busy paying off a mortgage. This is usually just to ensure that your loved ones will still be able to pay off your property should anything happen to you.
While life insurance isn’t glamorous, it can greatly help an insured person’s loved ones in many cases. Choosing whether or not you’ll take out life insurance is a personal choice and will depend on a number of things.
One major factor in deciding if life insurance is worth it, is to consider your situation. If you have dependents, taking out life insurance is recommended. However, if you’re single with no dependents, having a policy isn’t required.
Insurance Policies You Probably Don’t Need
A lot of insurance policies are definitely worth it. That said, there are certain kinds of cover you likely don’t require. Here are a few common policies you can cut from your insurance without compromising your cover too much.
Life Insurance for Children
As discussed, life insurance helps to cover the expenses your dependents will have if you aren’t around anymore. Children don’t have dependents, so taking out life insurance cover on them is unnecessary.
For many families, saving the money you’d spend on premiums for life insurance for children is better saved as part of a college fund.
If you ever lose your income, unemployment insurance will pay out some of your expenses. While it sounds like a great option, it’s not for everyone.
Firstly, if you never lose your source of income, your insurance policy won’t pay out. So you’ll have wasted all the money you spent. Secondly, you could opt to rather save the amount you would’ve spent, in which case you’ll end up with more money in the bank for yourself.
If it’s possible for you to save, building up a safety net of savings for a rainy day can be a better option than taking out unemployment insurance.
Regardless, this kind of cover can make sense to certain individuals, but it’s up to you to decide.
Credit Card Loss Insurance
Credit card loss insurance is designed to help you pay off your credit card when you can’t make payments anymore. If you have a lot of debt, this can make sense, but be careful.
Rather than making more debt, try to pay off your current debt as soon as possible so you can live debt-free. Paying off your credit card debt will make credit card insurance completely redundant. Additionally, you’ll also be saving the money you would have been spending in interest – it’s a win-win.
Even if you have credit card debt, consider taking the money you currently spend on credit card insurance and putting it towards your credit card bill instead. Stop making new debt on your credit card an you might be able to live debt-free just a little sooner.
Rental Car Insurance
Not everyone needs rental car insurance. Basically, this type of cover allows you to get a rental car if your car is out of order. However, if you have alternative means of transport, it’s completely redundant. Even if you don’t have alternative transport, consider what’s cheaper between renting a car for yourself vs paying rental car insurance each month.
Chances are, if you’re sitting without a car for just one or two days, paying your own rental will be much cheaper than insurance. But if you end up without a car for an extended period of time after an incident, your premiums might still work out cheaper.
The problem is that you never know what the future holds, so deciding whether you need rental car insurance depends entirely on you.
When deciding if insurance is worth it, your personal needs must be considered. Some kinds of insurance coverage are necessary, but you might be paying for cover you don’t need. Saving money on your insurance is always a win, so be sure to review your current cover and cut back on it if necessary. Surprisingly enough, you might even find that you’re over-insured in some areas, while completely lacking in cover for others. In that case, it would make much more sense to put your insurance money towards cover you really need.