Are you one of those people that wants to find ways to save money? Does following the latest frugal tips get you excited? I believe in reducing my expenses just like anyone else, but there are certain times when it pays to spend more. The best example of this is with insurance. I understand that this contradicts the popular wisdom, but I would rather protect myself against a worst case scenario than risk it.
There are many other personal finance websites that will recommend that everyone increase their deductibles in order to have lower premiums. It’s unlikely that you will have to file an insurance claim, so there no reason to have a low deductible. At least, that is the logic of many of my colleagues. Should insurance be something that only protects you for the emergencies that will put you in the poor house?
What many fail to mention is that with higher deductibles, it means more money out of your pocket when something does happen. Instead of trying to cut corners, I would rather budget in a slightly higher premium for the benefit of lower unexpected cost. I would much rather have the security of knowing that I will never have to lose a decent part of my savings because I was trying to save a few bucks a month. Think about what would be more detrimental to you – spending a few extra dollars a month and not having any major unexpected expenses OR saving those few bucks and digging into your savings when something does happen?
When I realized that I prefer to pay higher premiums for the bigger safety net, I realized that there was one area of insurance that was lacking: property insurance. I had been renting for a couple years and would occasionally think about what would happen if my apartment burnt down or if someone broke into my apartment. Truth be told, if something did happen, I would be completely devastated. I didn’t like the idea of feeling vulnerable.
While I was saving about $100 each month, it wasn’t worth the risk to me. So, I finally decided to get renter’s insurance. It is costing me a little more money and even though nothing has ever happened before, this guarantees me that I am covered. I will never have to go through my emergency fund for something that I could have prevented. I would hate to regret not doing it and if that means paying a little more for security, I am going to do it. If you are limiting your coverage and putting yourself at risk of going through your emergency fund too easily, it may be time to reconsider your insurance coverage. Is it really worth the extra dollars each month?