Is insurance a complete waste of money? If you have insurance and never need to claim, then YES.
The challenge then is to work out an appropriate amount of money to invest in your peace of mind as there is a chance that these premiums could be completely wasted.
Unless you claim on your insurance policy, the money that you spend on premiums is a complete waste of money. Unfortunately, though, insurance is one of those necessary evils.
The gamble that you take is that if you spend the money on insurance and you don't claim on it, then you've wasted all that money.
Conversely, the gamble of not having insurance is that you don't take up the cover, you don't spend the money on the premiums, and then should anything happen to you, you're left in the position that you don't have any funding other than what you saved yourself as a fallback, should anything go wrong.
HOW MUCH INSURANCE SHOULD I HAVE?
The challenge that you're faced with then becomes how much money should you spend on insurance, if there is a chance that you may never need to claim on this at all?
My suggestion here is first, work out how much you're prepared to spend on insurance overall. Then you need to focus on the types of things that you most likely to claim upon/have the biggest impact on your financial future.
To do this, I suggest rather than using the multiple of salary strategy, determine a purpose for the insurance based on what outcomes this provides for you and/or your family.
To help you with this, check out this link to my "insurance house view". This shares with you my beliefs when it comes to how the required levels of protection should be determined.
Use this information, you can look at this and then work out whether or not you agree with that, as a starting premise. Using this method will also give you the ability to come back and revisit the cover levels in the future, as these inputs change.
I have also build a tool in Facebook Messenger that will ask you a series of questions and provide you with a personalised report. These questions take less than five minutes to complete and I will send you a personalised report in less than thirty minutes (check it out here).
IMPORTANCE OF REVISION/REVIEW
Insurance should not be something you just "set and forget"
I believe that the ultimate goal is to have the minimum amount of insurance at all times. Checking back in on the reasons behind your insurance should be the driver of the level of covers you have. Often we get stuck simply focusing on the cost of the premiums.
So in conclusion, insurance can be a complete waste of money if you never need to claim on it
I have helped hundreds of people with claims over the years and the one thing each of them has joked about is that they wish they had more cover.
I can't argue with you that there is a chance you may pay all this money and never need to use your policy. In an overall sense, this is a good result however from a financial perspective, this is the dilemma we are faced with when making a decision as to the appropriate level of protection.
How did you pick the levels of cover you have? Let me know in the comments below!