When will insurance benefit you (and when will it not)?

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Understand when coverage will simply be another expense, or when it will provide you with financial security.

It’s not always easy to know when insurance coverage will provide you with any benefit or if it will simply increase the number of bills that you have to pay every month.

After all, in many cases, coverage isn’t about something that will certainly happen, but is instead a matter of understanding the size of your risk of an event, and whether or not it will be worth the premiums that you must pay in order to protect yourself from it.

In many situations, the odds of an event actually occurring – such as a house fire – are quite low, but it is still highly recommended that you obtain a policy that includes that damage, as it would be devastating should luck play against you.

But what about other forms of insurance? How do you know if you need them?

The trick is typically to balance the cost of coverage against what it would cost if you are faced with one of those unpleasant circumstances. The laws in your state should also help with this choice.

For example, many states legally require drivers to have some form of auto coverage. However, costs can be minimized by taking steps such as maintaining a good driving record and choosing a policy with a high deductible (assuming that you can afford to pay that deductible should you ever need to make a claim).

However, there are also a number of policies that can be considered to be more trivial. For example, extended warranties on consumer electronics products (that are also prorated, which further decreases their value), car loan payoff coverage, and flight insurance that would cover an individual’s death should it be caused by an airline accident.

Other policies aren’t as clear as they can benefit some people, but won’t be as helpful to others.

These can include the following types of policy. If you are unsure as to whether or not they will help you, speak with your agent for professional advice.

• Umbrella liability coverage
• Flood protection
• Gap Insurance
• Disability policies
• Private mortgage insurance

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