How Important Insurance? Car, Life, Health
Absolutely, yes.
I didn't have renter's insurance for years, because I was too lazy to call anyone and actually get it. Then a fire erupted in my apartment building, and destroyed a few dozen units. Now, thankfully, they were all on the other side of the building. None of my stuff was harmed. But it was sobering reminder that if the fire had been on our side of the building, absolutely everything I owned would be gone. I'd have started over from scratch.
I called for renter's insurance that day. Turns out, it's freakishly cheap. There is absolutely no reason to not have it. None at all.
A few bucks a month to insure tens of thousands of dollars in property is a pretty good idea.
You're forgetting that the chance of having to pay for fire damages is much lower than the chance of paying for the insurance.
There are three reasons why you might want to get insurance:
You have a super-linear valuation curve on their your assets. That is, you value a 10% chance of losing $10 more negatively than a 100% chance of losing $1. An example might be someone with a mortgage living hand-to-mouth -- if they run out of funds to pay for their mortgage, they pay a huge hit, so they need to keep their payouts low enough that they can cover mortgage.
You can "game" the insurance system. You have information that the insurance company's model does not take into account. That means that you're better-informed and know that the chances of a payout are worthwhile in your case. For example, if you are less careful about theft prevention than your peers, you might want to get theft insurance.
Because the chance of payouts for many types of insurance are more predictable for many people than for a few people, insurance companies need to keep a smaller ratio of assets around to pay out than each individual would.
A good rule of thumb is to try to never insure anything that you can afford to pay for yourself -- jack the deductable on your auto insurance up as high as you can handle, etc. (Note that this is a negative rule, showing you things that you should not buy insurance for, not things that you should buy insurance for. Just because you can't afford to pay for the costs of an alien invasion doesn't mean that it's a good buy to insure against it.)
Also, keep in mind one other thing. If you don't insure against something, it's really easy to deal with replacements -- you just pay for it. You don't have to deal with evaluating or proving losses or anything like that.
How to determine what is worth insuring/ if something is worth the cost of insurance:
For cars:
If the annual cost of policy is less than or equal to the insured items/liability resulting from loss, then it's worth it.
Example- You own a car worth $2,000 ($2k replacement value).
Policy A costs $2,500 per year and covers your vehicle price no matter who's at fault for the loss, and also covers your liability for damages to others up to $100k per event, plus personal injury up to $50k per event.
Policy B costs $900 per year and only covers your liability for damages to others up to $100k per event, plus personal injury up to $50k per event.
Which one is "worth it" depends on your financial situation a bit, however, generally speaking-the lower price policy would be the one to go with, as it covers your liability to others, but leaves you having to get yourself a new car (it's worth the risk exposure to perhaps have to pay for a new car, however, the potential medical bills etc would likely not be in your price range).
As far as renters insurance
The same applies. Could you replace your essentials (whatever that means to you), in the event of a loss, for less than the annual policy?
How about if the loss is due to your neglegance (you set fire to the unit, causes the loss+ damage to the unit)?
Some policies also protect you from liability in addition to your personal items.
Determining your insurance coverage is just a matter of determining what loss/liability you can absorb.
PS-to save TONS of money on the policy, set your deductible as high as you can afford (I have a $1000 deductible, which is backed with $1k in a high yield savings acct).
Below it was mentioned to double check that the policy covers electronics. If the electronics coverage is not up to what you own, you can easily increase that coverage (and you'd be surprised at how inexpensive it is). Addition coverage is referred to as a "rider". I play drums, and have a lot of drums/related music equipment...I have a specific rider on my policy that covers all of my musical equipment.
You can also (and I do this because it's cheap) buy riders for things like holiday parties, or large events held at your residence. To add a 36 hour "event coverage" rider to my home owners policy usually only costs me about $12. It will cover things like people falling and hurting themselves (if home negligance is to blame) or drunk drivers leaving and killing people/causing damage (hosts can be held liable for that sort of thing)...
I've been told before you should never buy insurance except for stuff you know will happen
Insurance is really for stuff that your are not expecting, or can't handle the liability of-any other expected events, financially speaking, should be "accrued" or saved up for...
and TL;DR
Yes, insurance is generally always "worth it".
I have always been wary of insurance because I've been told before you should never buy insurance except for stuff you know will happen (ie health, death) etc
This is not a good justification for buying something -- the insurance companies will adjust the numbers such that the average person tends to pay out more than they receive (and this is correct for them to do).
and insurance for vehicles (since those are mandatory).
Liability insurance for vehicles. This is when you smack someone else and may not be able to pay for the damage you cause to someone else or someone else's property.
You want to get insurance when you need to mitigate risk. Let's say that a 100% chance of paying an extra $150 is less bad for you than a .1% chance of paying an extra $150,000. Then you should get insurance.
A good general rule of thumb is that if you can afford to cover the cost of something, you probably don't want to insure -- the numbers aren't on your side.
You also want to raise deductibles as high as you can handle them.
Depends on the policy and what your stuff is worth.
Many policies don't pay replacement value, only current value. So you may get a lot less than you expect. Even replacement policies usually knock down the value quite a bit.
Of course the one time I needed renters insurance (a house I was renting burned down) I didn't have it. Fortunately (?) the rest of the neighborhood burned down as well, as this was a huge natural disaster (California wildfire) so I got disaster relief. Turned out to be more than I would have received if I had had insurance!
One thing to keep in mind when choosing your policy's deductible level is that it probably is not worth it to buy a policy with a low deductible. If you use your insurance, it gets much harder to get new insurance or your insurance premiums go up. For example, my apartment was robbed and I filed a claim. About a year later my husband and I were buying a house and we nearly couldn't do it because no one wanted to give us insurance since we'd made a prior claim. So if you value your ability to get insurance in the future, it makes sense to get (and pay less for) very high deductible insurance since you won't be making small claims anyway.
