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Are there insurances available that can be tailored to cover specific needs. E.g. my luggage is already insured through my credit card provider, health insurance is provided through my employment insurance, but my electronics are not covered (also missed flights are not covered). Are there insurance companies that allow me to tailor insurance to "fill the gaps", or is it cheaper to get default insurance (despite the fact that I'm overinsured)? Any information on saving possibilites?

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There are insurance policies that are available to fill various gaps. You might want to clarify which gaps. In the US "gap insurance" usually refers insurance for what's not going to be covered by your regular auto policy usually on leased vehicles. Plus you may want to check what's covered under your employment medical policy when it comes to travel. –  Karlson Jan 21 '14 at 21:40

1 Answer 1

The best and cheapest option is not to get these insurances (with the exception of health insurance, which you already have - but make really sure it actually covers travel).

One thing you have to understand is that on average, buying insurance is always a net loss for you. The expected value (probability of the insured risk occurring multiplied by the payout sum) is always considerably smaller than what you pay in premiums, since otherwise the insurance companies would not earn money. They have the world's topmost experts on statistics working for them as actuaries to ensure that insurances are always a net loss for the customer.

If an insurance seems "cheap", it's because either

  • The insured risk does not occur as often as you think
  • It does not cover as many cases as you think (e.g. most luggage insurances will deny your claim in cases of theft if you so much as set down the luggage for a second without looking at it.
  • or it does not pay out as much as you think (e.g. electronics may be only covered for their current used value, not the price of a similar new item).

So why buy insurance at all? Because there are some risks that can completely bankrupt you and which you therefore cannot bear; chief of these are medical treatments, disability and liability. Insuring against these is important.

Other insurances are a waste of money; people buy them basically for peace of mind and might argue that this has a value of its own, but I submit that this value disappears once you consider the factors described above and the fact that even if your claim is approved, all you get is money, not e.g. your luggage back, and only after you jump through a lot of bureaucratic hoops.

You're much better off not buying them and instead putting the money into an "emergency account" where you keep few thousand dollars to cover, well, emergencies. This is much more flexible and actually saves you a lot of money (you don't have to pay for the insurance companies' expenses and profits).

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+1, although I remember reading once that the actual underwriting often ends up being zero profit/loss, and the money comes from having that big pile of premiums lying around to invest with... –  AakashM Jan 22 '14 at 9:11
@AakashM: depends on the kind of insurance. In the case of travel insurance, I doubt that's a factor. And in any case, their investment gain is your investment loss. –  Michael Borgwardt Jan 22 '14 at 9:36

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