Making Cents: Insurance advisability is variable
You can insure just about anything. From the coverage that your favorite charity golf tournament takes out on opportunities to win a car for a hole-in-one to losses of body parts while on the job, there's a policy for just about everything. The question is whether you need the coverage.
There's a simple rule to go by: size up the risk. If you're going to give away a vehicle for a hole-in-one, the risk is relatively large, so you'll probably conclude that insurance is a good idea.
As for getting insurance in case you break your leg or lose an eye while on the job, it's often not a wise choice. Let's say that you are injured away from work. Is your trauma and financial loss any less because you were riding a bike through the woods when it happened rather than at work?
In either case, you are going to miss work and incur medical bills. But the financial loss is identical in both situations.
For those who are properly covered, these extras are typically not needed. This leads one to wonder if they are properly covered.
To me, basic insurance means health, life, disability, long-term care, homeowner's, liability and auto. Everyone needs to budget the cost for these basic policies into their cost of living.
It is not safe to assume that you are adequately covered for all of these risks through your job. Sometimes group coverage offered at work does not have as strong a benefit as you can buy on your own. And with companies still looking to cut costs in any way possible, cheaper or lesser benefits are always on the radar screen.
Similar decisions for optional coverage exist for nearly every purchase you make. I was recently offered an extended warranty on a $29 set of earphones I bought to use at the gym. I didn't pay the extra few bucks, and in about six months the earpiece broke. Did I make a bad decision?
When you buy a car, the extended-warranty question will be posed to you right after you settle on the vehicle and price. For some, an extended warranty makes a lot of sense; for others, not so much. If you are a buy-and-hold person who is hard on cars, perhaps it makes sense. Similarly, if you do a lot of city driving and spend time dodging potholes, the tire warranty is probably a pretty good deal.
There is no right or wrong answer with respect to extended warranties. Most consumer experts think they are a waste of money. But as a professional consumer, I think the correct answer for you lies in your own particular facts and circumstances.
John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at email@example.com or at www.makingcentsblog.com.