Insurance to buy:
1. Insure the potentially large loss, with a small chance of occurence. For example, the total loss of a property or vehicle or a large liability claim.
2. Compare the premium rates charged by different insurance companies for the same insurance product. Competition helps you to get a lower price.
3. Buy a product where the total claims paid by the insurance company represent at least 65% of the premium. You are getting a fair deal.
Insurance to avoid:
4. Do not insure a small loss that you can afford to pay from your savings, such as the Deductible on a medical insurance plan or the Excess on a motor insurance claim.
5. Do not buy any product that is designed to be different and are not comparable to other products in the market. It allows the insurance company to charge a higher premium, relative to the claim.
6. Avoid a product where the features are too complicated, and you are not able to determine the expected claim ratio.
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