Insurance — Buying Only What You Actually Need
- •Insure what is unlikely but unaffordable
- •Getting nothing back is normal, not a loss
- •A higher deductible means a lower premium
📋 Contents
One rule for deciding
When unsure whether to buy a policy, ask one question: if this happened, could I pay for it myself? If yes, you can skip it. If no, buy it. The test is size, not probability. Frequent but modest costs are better met from an emergency fund; rare events that would upend your life are what insurance is for.
| Situation | Odds | Better handled by |
|---|---|---|
| Cracked phone screen | High | Emergency fund |
| Death of an earner | Low | Insurance |
| Serious illness | Low | Insurance |
Insurance is not saving
The thought that premiums are wasted if nothing happens pushes many people toward savings-type policies. But bundling two functions usually does both poorly: thin cover, weak returns, and fees taken out along the way. Keeping protection and saving separate generally works better.
Cutting the premium
- Raise the deductible if you can absorb small losses
- Strip out riders that cover minor amounts
- Buy cover you truly need earlier — the total cost is lower
- Check for overlap, often with an employer group policy
- Review every few years as circumstances change
What you need changes
Life cover matters most while others depend on your income, but once children are independent and the mortgage is gone, that need shrinks sharply. Health and illness cover grows more important with age instead. Buy once and leave it for twenty years and you often end up paying for protection you no longer need while the gap that matters sits uncovered.
Frequently Asked Questions
Do I need health cover on top of public insurance?
It depends on what public cover already includes. If a significant gap exists and you could not fund it yourself, it is worth having. Check the public scheme's scope first.
I am young and healthy — why now?
With no dependants, life cover is not urgent. But premiums rise with age and a health issue can make you uninsurable, so cover you genuinely need is best not postponed.
Do I lose money by cancelling?
Savings-type policies often return less than you paid if surrendered early. Weighed against years of future premiums for cover you do not need, cancelling can still be right. Compare the surrender value with the remaining payments.
Should I just take the agent's recommendation?
Use it as input, not a decision. Commission structures favour larger policies. Asking what happens if this rider is removed, item by item, tends to leave only what you need.
Will claiming raise my premium?
It varies. Motor policies typically reflect claims at renewal, while fixed-benefit cover often does not. Check the renewal terms before you buy.