6.1.5 Whether to get insurance

From: Financial Consumer Agency of Canada

Here are examples of people deciding whether or not to get insurance for specific purposes. What would you do in each case? 

Example #1
Wei considers whether to buy tenants insurance or not.

Recently divorced, Wei has just moved into a new apartment. He has bought new furniture and appliances. Between the costs of moving, child support and alimony, money is tight.

What would you do?

  • Buy insurance to cover the full cost to replace all the furniture, at a cost of $400 a year.
  • Skip the insurance and save the money for other expenses.

For most people, the financial consequences that could arise in these examples would be expensive. That is why, in each case, the person must weigh the cost of the insurance against the risk.

Example #2
Thema considers whether to renew her auto insurance or not.

Thema is renewing the insurance on her six-year old Toyota. The agent offers her optional insurance coverage.

What would you do?

  • Buy collision coverage to cover repairs to the car for an extra $600 a year.
  • Find out what the car would be worth today and make a decision based on the value of the car.
  • Just stick with the basic coverage.

For most people, the financial consequences that could arise in these examples would be expensive. That is why, in each case, the person must weigh the cost of the insurance against the risk.

Example #3
Lisa and Eric consider whether to buy travel medical insurance or not.

Lisa and Eric are going on a six-week trip to South America. They've saved up $10,000. The tickets cost $4,200, leaving them $5,800 for all of their other expenses. The travel agent offers them travel medical insurance, for an additional $250, to cover the cost of medical treatment in case they need it while abroad.

What would you do?

  • Buy the medical insurance for the trip.
  • Skip the insurance and save the money for other expenses.

For most people, the financial consequences that could arise in these examples would be expensive. That is why, in each case, the person must weigh the cost of the insurance against the risk.

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