The Difference Between Necessary and Optional Insurance

Nobody wants to lose what they’ve worked so hard for. A broad collection of possible circumstances might bring about a financial loss. The worry about these chances is the catalyst behind the insurance business. Is it smart to buy insurance, or is it only a scheme to get your dollars by manipulating your fears? The truth is that it’s both. Some types of insurance are a very helpful proposal, and some are just a way to part with your money. How are you to discern the good from the bad?

Start with the things that you can’t afford to lose. Bear in mind your potential assets as well as your present ones. The chief no-brainers for nearly everyone are health, liability, auto and home. These are the things most people simply could not afford to lose in the worst case scenario. Liability insurance is usually included with something else, like homeowner’s insurance or car insurance. Umbrella insurance can be purchased to cover any liabilities above and beyond those covered under other policies. You might believe that you don’t need liability insurance if you don’t have significant assets. But a claim against you could garnish future wages, so don’t reject it automatically.

These basic kinds of policies have been available for a long time. Many respectable companies offer it, so you can comparison shop. Be sure you invest the time to get more than a few quotes. Fortunately many companies offer instant online quotes. You can get several auto insurance quotes in just a few minutes. Prices vary a lot, even between respectable companies, because they allocate the risk differently from each other. In your individual situation, one company could offer a much better premium than another. Also make sure you compare the coverage. You mortgage company or the bank that holds your car loan may require certain levels of coverage. This might make it easier to compare apples to apples.

Once you know what kinds of insurance are absolutely necessary for you, look at any other belongings you might want to cover. You can purchase errors and omissions insurance, an extended warranty on a blender, or travel insurance for a vacation. If you suffered a loss related to any of these things, you would probably get by. You may choose, however, to incur a small predictable monthly loss rather than a large surprise loss. Do the math on what you stand to lose and what the premiums are.

Find out if you already have coverage. For example, if your brand new stove stops working, it might be covered by the manufacturer’s warranty. Your credit card company might offer protection on items you purchased with the card for free.

If you are diligent about managing your money, you might even choose to self insure.

It’s often less expensive to insure several things under one policy. Your renter’s or homeowner’s policy could cover some of your belongings against some risks. Umbrella policies cover liability that might result from a car accident or an injury on your property as well as a variety of other situations.

You shouldn’t just get whichever policies are suggested by sales people. You should make a complete strategy that meets your needs.