We've written often here in Fooldom about the mistakes people make when investing:
But of course, we mortals don't err just in investing. We screw up when it comes to lots of other things, too -- such as insurance.
A major blunder is buying unnecessary insurance. Keep in mind that insurance is meant to address financial losses. Without health insurance, a serious illness could wipe you out financially. Similarly, life insurance is just insuring against loss of income because of someone dying; it can't do much else about death. That's why it doesn't necessarily make sense to insure the lives of your children, or even yourself if you're single and dependent-free. The death of a child is catastrophic in countless ways, but not usually financially. Likewise, if a dependent-free, single person bites the dust, it's not likely to put financial pressure on anyone.
Flight insurance is often another unnecessary expense. Airplanes are just about the safest means of transportation -- especially compared with cars -- yet people who don't carry sufficient auto insurance routinely buy flight insurance.
Ignoring disability insurance is another no-no. You're much more likely to become temporarily disabled during your pre-retirement years than you are to die, yet many of us take care of life insurance while neglecting disability insurance. Protect your income stream and look into getting it. Don't assume that your employer offers you sufficient coverage, either.
Another mistake is looking at insurance as a way for your loved ones to get wildly rich when you expire. You need to view insurance as financial protection, not a lottery ticket. Many people take out more insurance than they really need, and it costs them more than it needs to.
Finally, many people, after paying into a policy for years and years, will stop paying for it because of some short-term budget crisis. This is rarely a smart move, since insurance is vital and they're leaving themselves unprotected. If years go by and you don't have any claims, you might feel like you've been pouring money down a drain, but you haven't. All that time, you've been protected against any financial loss that could have happened during the time period.
Learn more about insurance in our Insurance Center. You may not have thought about some kinds of insurance, such as disability or long-term care insurance, but they're vital for many people. Take a little time to learn more, and you may be very happy you did should some calamity occur in the future.