Insurance isn’t a bad product. Sometimes, the problem is that we’re buying it without a clear idea of what we want it to do.
I think we should give insurance some of the same attention we give investing. When you invest, you usually have a goal: grow your money, try to keep up with inflation, or preserve capital while accepting a different set of risks. You choose an approach around that goal. Insurance deserves that same intentionality.
The purpose is different, though. Insurance transfers certain financial risks; it isn’t a stock you buy expecting a return. Going a year without a claim doesn’t mean you wasted the premium. It means the bad day you were protecting yourself against didn’t happen.
Start with the bad day you couldn’t afford
My starting question would be: what could happen that would seriously disrupt my finances or my life? Then: which losses could I reasonably pay for myself? Those are different problems, and they don’t necessarily need the same solution.
A higher limit or broader coverage can cost more, but spending more doesn’t automatically mean getting better protection. Price also reflects the insurer, location, deductible, and other factors. The goal is a policy that fits, not the biggest premium or the cheapest quote.
Know what you’re actually buying
I don’t expect everyone to become an insurance lawyer. But I do think you should understand what’s covered, what’s excluded, the limits, the deductible, and how a claim would be valued. Start with the declarations and coverage summaries, then check the relevant policy language and endorsements. A summary doesn’t replace the contract.
Ask your agent or broker to walk through a few realistic scenarios. What if my car is totaled? What if someone is badly injured? What if I can’t live in my home for months? Ask where the policy answers those questions. You may find you’re paying for a feature you don’t need—or missing protection you thought you had.
An older car is a useful example
If you own an inexpensive car outright and could comfortably replace it, collision coverage is worth evaluating. Compare its premium and deductible with the car’s value. Collision generally pays for covered damage to your car up to its actual cash value, less the deductible. A loan or lease may require that coverage.
Liability is a separate decision: it covers certain injuries or damage you cause to others, subject to the policy. A cheap car can still cause an expensive accident. Required minimum coverage is not necessarily enough for your situation, and a good driving history doesn’t remove the risk of a serious loss.
Uninsured- and underinsured-motorist coverage also deserves its own decision. Bodily-injury coverage can address injuries caused by a driver without enough insurance; it isn’t simply protection for the value of your car. I wouldn’t drop it just because the car is disposable. Requirements and options vary by state.
Get quotes for specific changes rather than assuming you’ll cut the bill in half. Choosing to absorb damage to your own car can make sense for some people. Taking on a loss you couldn’t actually pay for is a very different choice.
A home is a much bigger risk to keep yourself
The same framework applies to a home, but the scale matters. Self-insuring means retaining the loss and having resources to absorb it. It doesn’t just mean canceling a policy and hoping nothing happens. A mortgage may require insurance, and losing a home can also mean replacing belongings and paying to live somewhere else.
California wildfire coverage is a good example of why payout terms matter. Actual cash value and replacement-cost benefits are different. Some replacement-cost payments depend on repairing, rebuilding, or replacing the property. But ‘you must rebuild in the same place or get nothing’ is not an accurate general rule: California law provides protections for covered total losses when homeowners rebuild elsewhere or purchase another home, subject to the applicable coverage and requirements.
Before deciding coverage isn’t worth it, ask what you would receive, when you would receive it, and what conditions apply. Then compare that with what you could realistically fund yourself.
Review the strategy as your life changes
You wouldn’t necessarily keep the same investment allocation forever without looking at it. I think insurance deserves a regular check-in too—at renewal, when you move, or when your assets, household, or responsibilities change.
That might mean revisiting a deductible, increasing liability limits, or asking whether umbrella coverage makes sense. Check the underlying coverage an umbrella requires and its exclusions. Shop around, especially after a move, but compare equivalent limits, deductibles, and terms. A cheaper policy with a different hole in it isn’t the same product. Have replacement coverage confirmed before canceling what you already have.
Good insurance isn’t always cheap
And cheap insurance isn’t always good. I’m interested in newer insurance businesses, but I’d want to understand who actually carries the risk. The brand selling the policy and the legal insurer named on it may be different companies.
An established carrier behind a newer brand can be useful context, but it isn’t a guarantee of an easy claim. A small or new insurer isn’t automatically unreliable either. Check the actual insurer’s licensing, financial-strength information, and complaint history in context, along with the policy terms. A large name alone isn’t a substitute for that work.
The premium is the price you can see today. The coverage and claims process are what matter when you need the product.
Make it fit your life
My point isn’t that everyone needs more insurance, or that everyone should cut back. It’s that your insurance strategy should match your goals, your lifestyle, and the losses you genuinely want—and can afford—to keep yourself.
Know what you’re paying for. Revisit it when life changes. Spend deliberately on the protection that matters. Insurance should help you get through a bad day without derailing everything else.
This discussion is about property and casualty coverage, particularly auto, home, and personal liability. It does not cover health insurance.
These are my personal views, not those of my employer. I’m not acting as your financial adviser, insurance adviser, broker, or lawyer, and this post is not individualized financial, insurance, or legal advice. Coverage, eligibility, and claim outcomes depend on the policy, facts, and applicable law. Discuss changes with a qualified, appropriately licensed professional before acting. California examples should not be assumed to apply elsewhere. Health insurance is outside the scope of this post. AI assisted with editing and presentation; the underlying perspective is mine.