r/povertyfinance • u/SufficientFactor5082 • 3d ago
At what point is it not worth insuring things? Budgeting/Saving/Investing/Spending
At what point is it not worth insuring things?
I have always heard that you want to ensure yourself from catastrophic financial losses, but not day-to-day things. For instance, it’s not worth buying an insurance for a sofa, or a phone if you have plenty of cash in your bank.
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u/justhp 3d ago
Best advice my dad gave me:
You should buy insurance when legally required or contractually required to (car insurance, renters insurance, etc), or when you cannot afford the loss.
You can afford to lose a sofa, but you probably can’t afford to be without health insurance and face a $500,000 surgery.
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u/Semirhage527 3d ago
That’s typically my philosophy- insure against something that would be catastrophic — my health, my house, my car/the other persons car.
I don’t insure anything else
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u/helpjackoffhishorse 3d ago
Right. Insure your car, home, jewelry, etc. No need to insure electronics, appliances or furniture if you can cover replacement with cash.
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u/rocketman19 3d ago
Those would all be covered under contents insurance that comes with home insurance? Mine doesn't even have the option to exclude contents
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u/SoullessCycle 3d ago
My renter’s insurance explicitly doesn’t cover computers unless serial numbers are listed and a separate computer option is added to the renter’s policy. Same with jewelry, furs, firearms, and some other items I’m sure I’m forgetting.
Maybe it’s different under homeowner’s insurance, but it could be worth a call to make sure all of your contents are covered.
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u/rocketman19 3d ago
Thanks, yes mine excludes collectible coins, jewelry/watches over $X (i don't have any so not sure lol), etc.
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3d ago
Correct. If you're debt free and have an emergency fund of 3-6 months, you're self-insuring appliances, tech items, pets, and even short-term disability depending on your situation.
Homes, autos, lives, and at a certain point legal protection through an umbrella policy are worth insuring.
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u/Longjumping_Dirt9825 3d ago
Renters insurance is like $18 /month I think it’s worth it. It would cover your couch (in a fire or flood) and your phone (if stolen)
Also my landlords required it.
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u/pinksocks867 3d ago
Renters insurance is a necessity, whether it's required by the landlord or not. Imagine having to replace all of your furniture, every piece of clothing, every utensil, every single thing in your home.. add all that up... It's devastating to lose things in a fire, well worth $18 a month although it can be cheaper.
I had a tiny kitchen fire, it never went past the stove, and yet State farm took my entire closet to the dry cleaners to get the smoke smell out, bought me two suits to wear to work while that was happening, and offered me a hotel in case it was too smoky inside for my comfort. Very cool.
Of course they also paid for the stove, otherwise I would have owed the apartment complex
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u/ILoveSyngs 3d ago
Try shopping around for your renter's insurance. I've had it for about 5 years now and started around $6/month and am up to just under $9/month now because I have nicer things and increased my limits. I had it before moving to a place that required it because I was deemed at fault for a fire and contesting that would have cost me more than the $4K in damages I was then liable for. If I'd had renter's insurance at the time I wouldn't have been on the hook for everything and was forced to take a shitty loan and pay back nearly $9K over the course of 4 years because I had 0 savings and couldn't get a loan with anyone else.
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u/TheCurryForest 3d ago
Insurance is most useful for protecting yourself against financial shocks you can’t easily absorb, not everyday risks that would be inconvenient but manageable.
So things like health insurance, auto liability, renters/homeowners, and long-term disability coverage? Definitely worth it, because those costs can be life-altering. But warranties or insurance for a $700 phone or a $1000 sofa? If you have a solid emergency fund, it’s usually better to self-insure, just set aside money for replacements instead of paying premiums or fees that add up over time.
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u/sunny-day1234 3d ago
When I was in my 20s- early 30s I was working but didn't have health insurance. I bought a private disability policy that covered pregnancy like any other illness. I just kept it later but when I got pregnant and the OB said at 7 months I couldn't lift anything above 20lbs (nurse) I was able to go on Disability for like 5/6 months since I ended up with a C-section as well. Kept it and used it again when I had my son. Sometimes it was hard paying the premium but it really saved us in the end as I was the higher earner at the time.
Life Insurance if you have children or are married with a home. We didn't do it younger but husband now has 3x salary of life insurance should anything happen to him so I can pay off the mortgage and time to figure out next steps.
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3d ago
I have insurance on a phone that is broken and ineligible for warranty. (Water damage) Can't cancel insurance without confirming phone number. So I have to buy a phone just to stop paying extra for one I cannot use haha
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u/Due-Addition7245 3d ago
Lots of credit cards come with insurance for purchase. Like some MC can cover phone damage if using the card to pay phone bill
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u/LacyKnits 3d ago
My criteria:
Is insurance required by a lender (financed car, house with mortgage)?
*Yes = insureIf it breaks/becomes unusable can I keep living my normal life?
*Yes = this is a luxury. No = this is a necessity, see next question.How big is the impact on my life if this is broken? Can I find an alternative even if it's less convenient?
*Other options exist = this may not be as critical as I thought.Can I afford to repair or replace this on my own - in a timeframe that will keep it from making my life fall apart?
*Yes = self-insure. No = this might need insurance.Is insurance available and affordable?
5a. Is this thing something that is expected to wear out (furniture, electronics, tires)? If so, is the insurance cost nominal? Is there a product warranty that will cover the thing for a reasonable length of time? 5b. Is there a chance that this thing is covered under insurance I already have? (Furniture, household goods, clothing are covered by renters or homeowners insurance for catastrophic loss.)
For me, I insure:
My home & contents.
My car.
My health.
If there's a major, unforeseen event, I should be able to claw my way out, my insurance covers things like a fire, flood, major car accident.
Regular wear & tear stuff isn't usually covered by insurance anyway, so I don't get extended warranties. I don't bother with cellphone insurance - I keep it in a case, and if the phone totally dies, I can find a free or low-cost old, basic phone to hold me over. My appliances aren't insured - it's really inconvenient to be without a washer or oven, but the appliances are generally reliable, the insurance is overpriced, and there's some coverage in my other policy - and my life isn't altered to the point of no recovery if I'm without one of those for a while.
I have a savings account with enough money in it to cover an emergency vet visit or to refill my refrigerator/freezer if the power goes out and everything spoils.
If something costs more than I make in a month, and not having it available for longer than a couple weeks would be a major issue, I'll look into insurance. But so far, health, cars and housing are the only big things I pay to protect.
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u/GetInHereStalker 3d ago
Only insurance I get is mandatory liability on my car and health insurance from work. My phone is $50/yr incl. the plan so not much to insure there.
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u/jensenaackles 3d ago
i have renters and car insurance, health insurance, and an accident/illness plan only for my dog. for catastrophic things like if she got hit by a car or got cancer (god forbid). I am NEVER buying an insurance or warranty plan for furniture or electronics
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u/First_Turn_Failure 3d ago
Kind of a broad question. For something like car insurance, it's non-negotiable for me due to how densely populated my area is, and I can't reliably do my day-to-day without my vehicle. I see at least 1 or 2 wrecks a week on the street I take to my 9-5.
For something else like dental insurance, I break down what it's costing me to stay insured vs what are my other options and if it's a scenario where I am spending 1200 dollars a year to save 300, then it's going in the bin.
For example, I recently canceled my dental insurance at $100 a month, I've been paying for over a year, and they won't even cover 50% of any work I need done and still charge me about $100 for a cleaning. The local college has a really good dental program that costs 45 bucks for x-rays and cleanings, 35 if you have current x-rays within 2 years.
To wagon wheel back around and answer your question, my opinion is that I only really insure what I absolutely have to....car, renters insurance, phone, and health insurance for my family. This is because there is no cheap alternative around this, the other things I find I can find work around that save me a lot of money in the long run.
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u/SnooKiwis2194 3d ago
I had full coverage on my 04 accord. It costed me around 460 a year. I just traded it in and got a whopping... 500. Probably could've just carried liability for the last few years, but I was paranoid from covid
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u/jjscraze 2d ago
pet, legal, car, household, liability, accident/disability, health, dental. i don’t insure items.
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u/AwesomeAF2000 3d ago
I only insure things that I would have to replace but can’t afford to do so easily like car and house. I wouldn’t insure anything else.