Image courtesy of Paul Bx

There are so many different things that we can insure these days, but if we took out insurance on everything we could end up paying out a lot of money. It is important to weigh up the risks and find out exactly when the insurance will pay out and how much, before taking on a policy.

Some insurances are needed by law and some to follow rules. For example by law you have to have car insurance to pay for any damage that you cause to other people’s property when driving your car. You can take out insurance that will also cover damage to your vehicle as well and most people do this as replacing a stolen, burned or damaged car can be beyond most people’s means. If you have a mortgage then your lender will require that you have house insurance to cover the costs of any damage to the building in the event of a fire, flood or other such event. You may decide to take out contents insurance to cover your belongings in the same sorts of situations or in the case of theft.

Any other insurance is completely optional. You may choose to take out life insurance, income protection insurance, dental insurance, health insurance, pet insurance, caravan insurance or insurance on personal items such as mobile phones. However, as there are so many different types of insurance, it is likely to be too costly for you to take out every possible type of insurance that is available to you. Therefore you have to assess the risk and decide whether it is worth it.

It is worth remembering that insurance companies want to make a profit and therefore they will try to convince you that insurance is the cheapest and best option for you, when it may not be. Insurance is a risk as you never know if you will need to make a claim or if you will make back the money that you have paid out in premiums. Sometimes it is well worth it, just for the peace of mind, but sometimes you may even forget that you have it.

It can be hard to know whether you will need to use an insurance of not or whether it will be cheaper than not having it. For example, dental insurance usually just spreads the cost of the treatment across a year rather than it having to be paid all in one go, but if you have good teeth and usually only need a check-up then the insurance will be dearer than just paying for the yearly check-up. If you look after your teeth, then chances are, that treatment will never be that expensive and so insurance is unlikely to be necessary.

However, with something like pet insurance it is very hard to know whether to have it or not. Youw will be paying out each month, but you will never know whether your pet will need treatment in the future and so you will have to make a guess as to whether insurance if the right thing for you and your pet or not.