What’s the value of insurance, and how do we justify its cost?
It’s a question every person considering insurance must wrestle with…and the answer is often shaped by life experience, education, personal circumstances, and even where someone lives. Some see little value in insurance, especially if they’ve dealt with denied claims or frustrating billing. Others view it as priceless, like when a costly surgery is fully covered by a supplemental plan.
One way to cut through the noise is to step back and consider the purpose of insurance. Most policies aren’t designed as investments. In fact, we rarely “get something back” from premiums unless a claim occurs. And even then, deductibles and exclusions often prevent us from being made completely whole. That’s why it’s better to think of insurance through a different lens: What kind of loss would seriously damage me financially?
Answering that question helps clarify both the type of insurance to consider and whether the cost makes sense. For example, if you know you can comfortably handle losses up to $10,000, then paying extra each month for a low deductible may not add real value. In the same way, it may not be worth paying for insurance on smaller items…like laptops or gaming systems…when those losses wouldn’t cause lasting financial harm. When you step back and look at how many decades you might pay for coverage, the cost-benefit question becomes even more important.
Ultimately, a clear understanding of what insurance is meant to do…protect you from financial devastation…makes it easier to determine its true value.
