What's Worth Insuring?

The story: Marcus sorts the risks

At a store counter, Marcus weighs a phone protection plan, then pictures an apartment under an umbrella.

1. Narrator: Marcus is buying a $450 phone. At the counter, there’s an offer: a protection plan for $12 a month.
2. Narrator: Over two years, that plan costs $288, plus a $99 fee each time Marcus makes a claim.
3. Marcus: A cracked screen I could fix from savings. That’s a dent, not a disaster. I’ll pass.
4. Narrator: But a fire at Marcus’s apartment could wipe out about $15,000 worth of stuff in one night.
5. Marcus: I couldn’t replace all that. My renters quote is $15 a month. That one is worth it.
6. Narrator: Insure the disasters. Save for the dents.

What you’ll learn

1. How insurance works

   Many people pay a small amount into a shared pool. The few who have a big loss get paid from it. You pay a premium to stay covered, and the insurer pays for covered losses, up to the coverage limit.

2. Deductibles, limits and exclusions

   The deductible is what you pay on a claim before insurance pays. The coverage limit is the most the policy will pay. Exclusions are things it won’t cover at all, like floods on many renters policies. These three tell you what you really bought.

3. Higher deductible, lower premium

   Picking a higher deductible usually lowers your premium. That trade works best when an emergency fund could pay the deductible if something happens. Without savings, a lower deductible can be the safer pick.

   Example: a $500 deductible at $18 a month vs a $250 deductible at $24 a month.

4. Insure disasters, save for dents

   Most people insure what they couldn’t pay for on their own: their health, their income, big costs if they hurt someone or damage someone else’s things, and belongings that would cost a lot to replace. Small losses come from savings, and many small claims can raise your premium.

Key words

premium

what you pay to keep insurance

deductible

what you pay on a claim before insurance pays

coverage limit

the most a policy will pay

exclusion

something a policy won’t cover at all

Common questions

Is a deductible the same as a tax deduction?

No. A deductible is what you pay on an insurance claim before the insurer pays. A tax deduction lowers the income you pay tax on. Similar words, different ideas.

Is renters insurance worth it?

Many renters find it cheap next to the cost of replacing everything they own, and it often includes liability coverage. Prices vary, so a quote shows the real trade.

Remember this

Insure the disasters. Save for the dents.

Try it: List your policies

1. List each insurance you have, like health, renters, car or phone.
2. Write down the premium and deductible for each one.
3. Mark which ones protect against a disaster and which only cover dents.

A list of your policies on paper or in your phone’s notes.