While insurance can seem like a waste of money, there are certain types of insurance that are important. You rarely get any benefit from making those monthly insurance payments. After all, how many times has your house been struck by an earthquake or a catastrophic fire? It just doesn’t happen very often, but sometimes it does.

On the other hand, several types of policies don’t make a lot of sense for most of us.

Insurance you might want to consider purchasing:

1. Homeowner’s or Renter’s Insurance. If you own a house, your investment in your home and possessions is worth protecting. You’re probably legally obligated to carry insurance if you have a mortgage. Renter’s insurance is inexpensive since it covers only your belongings and not the building itself. That’s your landlord’s responsibility.
   • If you have automobile insurance, your insurance company will often offer homeowner’s or renter’s insurance at a discount. It’s worth asking about.
2. Life Insurance. Consider carrying a life insurance policy if anyone else depends on your income. Even if you don’t have a family of your own, having enough insurance to cover your funeral costs would be considerate.

• Most employers offer inexpensive life insurance.

3. Health Insurance. It’s nice to be able to see a doctor any time you’re sick or injured. Health insurance is expensive unless you have a very generous employer. Health insurance, though, is a definite necessity to cover the expenses of a significant medical emergency. Most of us cannot afford the huge bills from hospitals or prolonged medical treatment.

• The most favorable policy will depend upon your current health and age. There are many options to match your budget and needs.

4. Disability Insurance. Will you have any income if you’re unable to work? It’s possible to receive social security payments, but that can take months and certainly won’t cover the rent, mortgage, or other bills.
   • Disability insurance restores a percentage of your income, typically 50-80%, depending on the policy. Most policies will pay if you cannot work up to age 65. Others are designed to pay for 5 or 10 years, regardless of age.
   • As long as you have disability insurance, your financial situation doesn’t have to change dramatically if you cannot work.

Carrying all these insurance policies can be expensive. You may be able to offset some of the cost by avoiding other types of insurance you’re unlikely to need.

Types of policies you might want to consider avoiding:

1. Credit Insurance. This is designed to pay your credit card bills upon death or disability. It may pay all of your balances or a portion of them. This insurance is expensive and often unnecessary.

• If you have life insurance and disability insurance, you’ll be fine. Credit card balances are unsecured debts anyway. That’s the risk the credit card companies take.

2. Child Life Insurance. The whole point of life insurance is to provide for dependents. Your children are unlikely to have any. Put the funds toward a college savings plan instead. If anything unexpected happens, you’ll still have money available.

Other policies rarely make sense: flight insurance, ID-theft insurance, and dread-disease insurance.

Insurance is a necessary part of a secure financial situation. It may seem like a regular waste of money since you may never see a payout, but that’s not true. Insurance is a cost-effective means of hedging risk. If you ever need it, you’ll be glad you have it.