And What’s a Waste of Money
Updated 07.30.2026
Insurance exists to protect you from financial catastrophe, losses so large they’d derail your finances for years. That’s the test: does this coverage protect against something catastrophic, or am I just paying for peace of mind on something I could handle myself?
Run every policy through that filter and the right answers get a lot clearer.
The Non-Negotiables
These are the types of insurance most adults genuinely need. Skipping them is a real financial risk, not just a missed convenience.
Health Insurance
Without coverage, medical bills escalate fast. A routine ER visit without insurance typically runs somewhere around $1,000 to $3,000, and that’s before anything serious. A visit requiring real treatment or a hospital admission can climb well into five figures, sometimes far beyond that.
If your employer offers health insurance, take it, even if the premium feels high, the coverage is almost always worth more than the paycheck hit. If you’re self-employed or between jobs, you’ll be comparing plans on healthcare.gov instead. Looking only at the monthly premium is a common and costly mistake, a full evaluation means checking the deductible, copays, coinsurance, and out-of-pocket maximum too, since the cheapest premium is sometimes the most expensive plan overall once you actually use it. I go much deeper on how to actually compare these, including a genuinely important 2026 subsidy change most people haven’t heard about yet, in How to Choose the Right Health Insurance Plan.
Auto Insurance
Required by law in almost every state, but the minimum legal coverage isn’t always enough to protect you. Liability coverage, which pays for damage you cause to others, should generally be set well above your state’s minimum, since the minimum is designed to be legally compliant, not financially adequate. Collision and comprehensive coverage protect your own car, and whether they’re worth keeping depends mostly on what your car is actually worth. I’ve broken down exactly how much of each type to carry in How Much Car Insurance Do You Actually Need?, and how to lower what you pay for it without cutting coverage in How to Save Money on Car Insurance Without Losing Coverage.
Life Insurance
Only if people depend on your income. If you have a spouse, children, or anyone relying on your paycheck, you need life insurance, almost always term rather than whole life for most situations. If nobody is financially dependent on you, you probably don’t need it yet. See How Much Life Insurance Do You Actually Need? for the actual math, and Term vs Whole Life Insurance for which type actually makes sense for your situation.
Renters Insurance
If you rent, this is one of the best value insurance products that exists. It covers your personal belongings against theft, fire, and other covered events, plus liability protection if someone is injured in your home. Most policies run somewhere around $13 to $24 a month nationally. The replacement value of your furniture, electronics, and clothing alone likely exceeds $20,000, renters insurance covers all of it for less than the cost of a couple of streaming subscriptions.
Many renters skip it, assuming their landlord’s insurance covers their belongings. It doesn’t. The landlord’s policy covers the building, not what’s inside it.
Homeowners Insurance
Required by your mortgage lender if you have one. Covers the structure, your personal belongings, and liability. Shop around at renewal, rates vary significantly between insurers for identical coverage.
Highly Recommended for Most People
Disability Insurance
Your ability to earn income is your most valuable financial asset, and disability insurance replaces a portion of it if you’re unable to work due to illness or injury. Most people insure their car and their home without ever insuring the income that actually pays for both.
Here’s the part that matters most for this audience specifically: workers in construction, trades, and retail have some of the lowest rates of employer-provided disability coverage of any industry sector, while office-based industries like finance and insurance tend to have the highest. If you work with your hands for a living, there’s a real chance nobody’s ever offered you this benefit at all, not because you don’t need it, but because your industry statistically doesn’t provide it as often. The Social Security Administration estimates that roughly 1 in 4 of today’s 20-year-olds will experience a disability before reaching retirement age, and the risk doesn’t stop climbing once you’re past your 20s.
Check whether your employer offers short-term or long-term disability coverage first, some do, even in industries that don’t always advertise it well. If not, an individual policy typically costs somewhere around 2% to 4% of your income for solid coverage, worth it, especially if you’re self-employed or otherwise have no safety net if you couldn’t work for months.
Umbrella Insurance
An umbrella policy adds liability coverage beyond what your auto and homeowners policies provide, typically starting at $1 million for somewhere around $150 to $400 a year. Worth serious consideration if you have real assets to protect, or honestly, even if you don’t, since a lawsuit judgment can follow your future wages too, not just what you currently own. I’ve broken this down in more detail in Do You Need Umbrella Insurance?
What’s Optional (Situation Dependent)
Pet insurance. Worth running the actual math. If you’d pay for expensive veterinary treatment regardless of cost, it can make sense. If you’d make cost-based decisions about treatment either way, it’s less clearly worth it.
Travel insurance. Valuable for expensive international trips, cruises, or non-refundable bookings. Less necessary for domestic trips or anything with flexible cancellation.
Long-term care insurance. Increasingly worth a look as you approach retirement. Long-term care costs can be substantial and generally aren’t covered by standard health insurance or Medicare. Most useful to seriously consider in your 50s, before premiums climb to the point where they stop making sense.
What’s Usually a Waste of Money
Extended warranties. Retailers sell these at enormous margins. Most consumer electronics either fail immediately, covered by the manufacturer’s warranty, or last years without issue. Self-insure instead by putting the warranty cost into savings.
Credit card insurance. Pays your minimum payment if you lose your job or become disabled. The premiums are high relative to the actual benefit, the conditions are restrictive, and better options already exist, real disability insurance and an emergency fund among them.
Mortgage life insurance. Pays off your mortgage if you die. A regular term life policy almost always provides better value for the same protection at a lower cost.
Whole life insurance, for most people. The investment component rarely outperforms simply buying term and investing the premium difference yourself. See Term vs Whole Life Insurance for when it actually does make sense.
The Simple Framework
For any insurance decision: would an uncovered loss be financially catastrophic, something that would take years to recover from? If yes, insure it. If no, consider self-insuring by building savings instead.
When you’re ready to compare actual quotes, Policygenius lets you compare life, auto, and umbrella coverage across multiple insurers in one place.
Frequently Asked Questions
Ask whether an uncovered loss would be financially catastrophic, something that would take years to recover from. If yes, insure it. If it’s something you could comfortably self-insure by building savings instead, it’s likely optional.
Workers in construction, trades, and retail have some of the lowest rates of employer-provided disability coverage of any industry sector, while office-based industries tend to have the highest. That gap has nothing to do with actual need and everything to do with what your industry typically offers.
For most people, term life plus investing the premium difference yourself tends to come out ahead. Whole life makes more sense in specific situations, like a lifelong dependent or certain estate planning needs.
No. A landlord’s policy covers the building itself, not the tenant’s personal belongings. Renters insurance is the only thing that covers your own property, and it’s inexpensive relative to what it protects.
Usually not. Retailers sell them at high margins, and most products either fail immediately under the manufacturer’s warranty or hold up fine for years. Putting the warranty cost into savings instead is generally the better bet.
Sources
ER visit cost ranges without insurance: CoveredUSA
Renters insurance average cost: NerdWallet
Disability likelihood and industry coverage gaps: Social Security Administration, Student Loan Planner
Umbrella insurance cost: PolicyManagerHub