How many products can you name that you buy hoping you never have to use them? Perhaps a fire extinguisher, a mousetrap, or a bottle of painkillers come to mind. But those are small-ticket items, comparatively speaking, that barely put a dent in your budget. We pay for them without giving too much thought to the expense. That’s not true of another product most of us will purchase at various points in our lives: insurance.
The Price of Peace of Mind
Let’s take a look at some basic statistics:
- The average American pays about $7,000 a year for health insurance alone.
- Depending on which type of policy, those of us who carry life insurance—about half of us in the United States—can add between several hundred to several thousand dollars per year to their budgets.
- If you own a car and have a good driving record, your insurance costs will increase by about another $1400 per year.
- Are you a homeowner? Homeowners insurance, which is mandated by most lenders if you have a mortgage, will run you about $2000 a year, even for a policy with modest benefits.
- More and more pet lovers are carrying pet insurance too, which can add another $500 or more to the tally.
Any way you slice it, insurance takes a big chunk out of our budgets. But while you might loathe paying for it, many types of insurance are imperative. If you drive a car, carrying auto insurance is required by law in all but a handful of states. If you have children, having life insurance is a moral, if not legal, must. And if we had to pay for healthcare out of pocket, many of us would be bankrupt in no time.
The Cost of Not Carrying Insurance
Insurance not only insulates you from financial liability, it also protects the people who may be injured should you cause or contribute to an accident through your own negligence. Think of it this way: carrying insurance is a public service we do for one another.
Today, juries routinely award million-dollar verdicts in auto (and other) accident cases where a plaintiff is killed or permanently disabled. Even a relatively minor injury, such as a broken leg, can result in a verdict near $100,000. Ask yourself what you would do if you were financially liable for another person’s injuries and the argument for carrying insurance becomes even stronger.
Choosing The Right Policy
It’s entirely possible—and indeed, necessary—to customize your insurance policies to suit your financial circumstances. While we all want to limit our insurance expenses, it’s important to be sure you’re adequately covered. The higher your net worth, the more liability coverage you need, for example. If you can afford to pay a couple of thousand dollars out of pocket in the event you have to make a claim, you can lower your policy costs by choosing a higher deductible. Many insurers offer policy discounts—examples include a safe driver discount on auto insurance and a home security system discount on homeowners’ insurance—so be sure to take advantage of any discounts you qualify for. Consult an experienced, trustworthy agent who can guide you towards choosing policies that balance sufficient coverage with affordable costs. And before you settle any type of claim, be sure to speak with an attorney who can help you navigate the insurance claim process.
Susan Doktor is a journalist, business strategist, and principal at Branddoktor. She writes on a wide range of topics, including personal finance, real estate, and insurance matters. Follow her on Twitter @branddoktor.