Let’s face it, the insurance wouldn’t exist if it wasn’t a money-maker. The fact that there are so many different insurance companies insuring so many different kinds of risk implies that it’s an extremely profitable endeavor. And if the insurance companies are making money, it’s probably safe to assume that you’re losing it.

Insurance Is Like Gambling

Don’t get me wrong, insuring against major catastrophe (cancer, automobile accident, a malpractice suit, a tornado destroying my home) is well worthwhile. True, the chances of any one of those horrible events happening to me personally is relatively low. That is, there’s a pretty decent chance that I’ll never see a dime of those insurance premiums again. However, the cost of any one of those events, nevermind several of them simultaneously, would be disastrous.

I quite simply couldn’t afford to spend $1 million on cancer treatment for myself or a family member and I’d be hard-pressed to come up with $100,000 to pay off somebody else’s medical bills should I cause an auto accident. Since the consequences of being uninsured are too much to bare on my own, I have no choice but to purchase insurance for those events. The same isn’t true of most other forms of insurance coverage, however.

Have you ever purchased road-side assistance coverage? Chances are, you bought it because it only added another $10 or so per month to your insurance premium. What they don’t tell you, however, is that your car would have to great down at least once or twice per year for that coverage to be worth the price you pay. And if you had to, chances are good you could afford the costs out of pocket. After all, a tow truck isn’t all that expensive and won’t put you in bankruptcy court. Road-side assistance is a huge money-maker for insurance companies.

Can you think of any other examples of insurance coverage you’re over-paying for (mortgage insurance is a good example)? After a certain point, insurance no longer becomes worth the cost. Chances are, if you can afford to pay the costs without too much strain, insuring something is a waste of money.