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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2There 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.– KarlsonCommented Jan 21, 2014 at 21:40
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1 Answer
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).
answered Jan 21, 2014 at 23:03
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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...– AakashMCommented Jan 22, 2014 at 9:11
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@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. Commented Jan 22, 2014 at 9:36
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@MichaelBorgwardt : I find your advice quite dangerous. Yes, in some cases insurances are irrelevant because the risk is very low. But do you really want to travel to dangerous countries (i.e. all across latin america) with valuables (i.e. camera, laptop, cash, credit cards, passport, driving license, & more) and just hope for the best!? Not me. I know that my chances of getting robbed or mugged would be high, hence I'd be more than happy to pay a reasonable monthly fee to insure my valuables.– AdrianoCommented May 21, 2015 at 10:09
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@AdrienBe: I find your beliefs quite irrational. First of all, it's not as if the insurance will prevent the loss. You'd still have exactly the same bad experience, hassle of having the stuff replaced and loss of intangibles (such as pictures). You will merely get reimbursed for the used value of the items, if the insurance company doesn't find a reason to deny coverage (which they are very good at). Also, you do not know the chances of getting robbed or mugged as well as the insurance company - they are making a healthy profit by knowing it better than you. Commented May 21, 2015 at 11:01
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@MichaelBorgwardt : I know what I pay the insurance for, that is, to give me back part of the value of what was stolen. I understand what you mean by having the same bad experience, unfortunately, that you cannot always avoid. Yes, insurances will try not to pay you back and you'll probably have to chase them, that's quite typical. Let's not go into too much debate, the main point is, do you want to have the peace of mind that if you get your stuff stolen or broken an insurance will give you back its value? If yes, then pay for it. If not, just don't take it.– AdrianoCommented May 21, 2015 at 11:10