Strategy # 15: Don’t risk a lot for a little

You: I dare ya!  No, I double-dare you!

Thanks for the flashback to second grade.  No folks, when I say “Don’t risk a lot for a little,” I am not talking about jumping off the 25-foot bridge to save your pride with the other kids living in the “Whisper Walk” subdivision, even if the reward of your survival would be “endless coolness.”  Instead, we’re talking about insurance.

While there are some types of insurances which are unlikely to make any sense in any scenario (for example, accidental death and dismemberment), others are shockingly more appropriate than you might expect. A general rule of thumb when evaluating an insurance policy is to not risk a lot for a little.

You: What does that mean–in the real world?

Let’s use renter’s insurance as an excellent example of applying this strategy appropriately.  Renter’s insurance is remarkably inexpensive, yet protects you in the event of some fairly horrific events.

You: Doesn’t my landlord insure the building?

Probably. But your landlord’s insurance policy does NOT insure your possessions. So, whether it’s your fault (”Oops, my curling iron!”), due to bad construction (”Huh? Yeah, it looks even enough to me!”), or thanks to a careless neighbor (”Sorry, but I so totally meant to put that cigarette out before I passed out”), just one event can destroy all your worldly goods.

You: Bummer.

Yes, especially when you can protect your possessions from most unforeseen circumstances for (typically) just a few hundred bucks a year.  On the other hand, if you do not purchase renter’s insurance, you risk a lot (virtually everything you own) for a little (a relatively small premium.)

Don’t do that. If you rent, purchase renter’s insurance.