It’s a matter of opinion in most cases when you are considering whether insurance is worth spending money on. Sometimes it’s mandatory to buy insurance. In Canada, you cannot legally drive or operate a motor vehicle that does not have insurance on it. This is for good reason, too. Motor vehicle accidents are very common anywhere that vehicles exist, and if you are injured in a car accident or injure somebody else, you’ll have to pay the piper yourself if you don’t have insurance.

Can you imagine having to somehow dish out a million dollars because you carelessly drove without insurance?

There are many other types of insurance that are completely optional and it is up to the individual to decide whether they will be buying it. These include home, pet, tenants, and life insurance.

Further to that, there is a slew of options when you buy insurance which you can choose to alter how much coverage you have and for what instances.

There are many people who are completely over insured as well. While insurance is certainly important in many different circumstances, having too much of it can be harmful to your bottom line.

Home Insurance

I got into a discussion about insurance one time with a coworker who had a tenant in his basement suite. He bought the house as an investment and was able to make a pretty penny off of the rent while reducing the mortgage payments for his self. Because it was an investment, he was quite nervous.  He had home insurance on the house (as he also lived in it, on the top floor), landlord’s insurance like that offered by CIA Landlords, and he told me that he put on his rental agreement with his tenant that tenant’s insurance is required.

They had three different types of insurance policies on one house (or, at the very least the contents).

Now that is what I call over-insured.

Of course, it is pertinent that he had one of the insurance policies on his place. However, If he had put away the amount of money he was spending on one of the policies and kept his main policy, he’d be able to cover any small incidentals that come up himself.

Life Insurance

Life insurance is another area that many people become over insured in. A family member not only paid into her own life insurance policy but also got one through her work benefits. She didn’t know that her work benefits provided life insurance, otherwise she wouldn’t have taken out her own policy.

Many people also insure members of their family who aren’t earners or wouldn’t have a huge financial impact on their finances if something did happen to them. The purpose of insurance is not to clean up if a loved one dies, but rather to make it easier on a family if a breadwinner passes away.

Mortgage Insurance

Some companies call this mortgage protection insurance, some mortgage life insurance, but generally across the industry it’s called mortgage insurance. Mortgage insurance differs from life insurance, in that you don’t get a cash payout if somebody passes away; it just pays down your mortgage.

This is generally not the best bet, because in the unlikely case that a breadwinner passes away, you won’t have any way to cover other bills; sure, the mortgage will be paid off but what about all of the other expenses?

It’s good to be careful and get insurance on some things but it’s easy to become overinsured.