How Much Insurance Do You Really Need – Are you confused with how many insurance policies you can buy? So are we, but which products do you really need? One could argue that this is the age of hurricanes, tsunamis, market crashes and banking crises, and that we don’t feel secure unless there’s a policy stating so.
Companies are responding by rolling out a raft of new-invented policies designed to protect against real and perceived risks.
Here’s one example: A company called Home Value introduced a policy that promises to protect Ohio homeowners from tumbling property values. The firm plans to expand its offerings across the U.S. Meanwhile, another group in August started selling policies that provide supplemental unemployment protection, pitched as a way to guard against sudden job loss.
And earlier this year, American Express introduced an identity-theft protection service that helps policyholders detect fraudulent activity on their credit cards, while lender SLM, commonly known as Sallie Mae, began offering tuition coverage if a student drops out of college for medical reasons.
These days, you can buy anything and get all the protection you want, but how much coverage could one person or family need?
It is only natural to want to protect your family. But some products that sound good don’t hold up to closer scrutiny.
Loading up on policies “makes sense as a psychological phenomenon, but it doesn’t make financial sense,” says Zur Shapira, a professor of management at New York University who has studied insurance during much of his career. After all, the more money you spend on protection, the less money you will have left to protect.
“If you can afford to replace it, don’t insure it,” says J. Robert Hunter, director of the Washington-based Consumer Federation of America and a former Texas commissioner.
Christine Schmitz, a certified financial planner in Owing Mills, Md., recommends focusing on getting the most value from traditional coverage and skipping the rest. “Make sure you have great health insurance,” Schmitz doesn’t recommend paying the extra $100 buying piecemeal coverage. And that’s one way to determine how much money you should be paying for a policy.