Rule 9 of 19 · Chapter II — Pay Yourself First
Insure catastrophes, not inconveniences
Why this rule exists
Insurance is for the disasters you could not write a check for, not the small stuff you could. People get this backwards, buying cheap extended warranties on gadgets while underinsuring their health, income, or home, the things that could actually ruin them. The right question is not could this go wrong but could I survive it if it did. Insure the rare, ruinous events and self-insure the frequent, affordable ones. Paying to transfer a risk you could easily absorb yourself is just a slow, guaranteed way to lose money.
In practice
List what would genuinely wreck you: a serious illness, a disability that stops your income, a house fire, a lawsuit, leaving dependents without support. Make sure those are covered well, with deductibles set as high as your emergency fund can comfortably handle, because higher deductibles mean lower premiums and you are keeping the small risks yourself. Then skip the small-ticket coverage: the phone insurance, the appliance warranty, the rental-car add-on you do not need. Review it when life changes, a marriage, a child, a house, not on a marketing schedule.
When it doesn't apply
If you have no emergency fund yet, a low deductible may be worth the higher premium until you do. And some small coverage is really catastrophe coverage in disguise. Travel medical insurance abroad, for instance, can stand between you and a ruinous bill.