Insurance – only cover what really hurts

In depth

Sizing cover by need

Once the existential risks are covered, the next stumbling block is the amount of cover — too little fails to protect, too much costs needlessly. For personal liability, a flat sum of around three to five million euros for bodily injury, property and financial loss is now considered a sensible standard, because the policy may have to shield an entire working life. For disability insurance, the rule of thumb is a monthly benefit of roughly 70 to 80 percent of your current net income, so that enough remains after tax and ongoing costs. For term life insurance, the sum should match outstanding debts plus what surviving dependants need to live on for several years — often three to five times an annual income. A common advanced mistake is to set the sum once and never revisit it, even after salary, loans or family have changed. So review the amounts at every major life event, not just the price.

The fine print decides

At the next level it is not price but the policy conditions that separate good cover from bad — and these are exactly what people overlook when comparing. For disability insurance, waiving the so-called „abstract referral“ clause is crucial: without that waiver, the insurer may point you to another theoretically reasonable job and refuse to pay. Also check the benefit trigger — payment usually starts from 50 percent incapacity — whether payment is backdated to the onset, and whether there is a guaranteed top-up option that lets you raise the benefit later without a fresh health check. The health questions on the application are not a detail: answering incompletely or wrongly risks the insurer refusing to pay later for a „pre-contractual disclosure breach“ — better to review your own medical records beforehand. For contents or building insurance, look at gross negligence, natural-hazard cover and the waiver of underinsurance. No one enjoys reading conditions, but they are the real value behind your premium.

Using order and timing

Advanced planners ask not only which insurance they need, but when and in what order to buy it. Disability cover grows more expensive — or impossible — with every passing year and every new diagnosis, so young, healthy people lock in permanently low premiums and should act early, often already during training or study. A widespread mistake is double-insuring small risks: phone warranties, trip cancellation for a cheap weekend, or a separate glasses policy cost more over the years than a self-paid loss ever would. It makes more sense to hold an emergency fund of roughly three to six months of expenses as your own „insurance“ for the small cases. Choosing a higher deductible — say 150 instead of 0 euros on contents cover — noticeably lowers the premium and means you carry only what you can easily absorb. The result is a lean system: heavy protection where a loss would ruin you, and calm self-funding where it would merely annoy.

The frequency-severity grid

Before buying any policy, sort the risk onto a simple two-by-two grid: how often it happens (frequency) against how much it hurts (severity). This single framework explains almost every good insurance decision. High-severity, low-frequency risks are exactly what insurance exists for: you can't self-fund a lawsuit that runs into six figures, a decade of lost income, or leaving a young family without a breadwinner. These belong in the top-left quadrant and you insure them first, fully. Low-severity, high-frequency risks sit in the opposite corner: a cracked phone screen, a scratched bumper on an old car, a lost pair of glasses. These you can predict and absorb from a small buffer, so paying a premium plus the insurer's margin is a losing bet over time. The dangerous quadrant is high-frequency, high-severity, which usually signals a lifestyle or safety problem no policy can fix. A worked illustration: if a gadget policy costs, say, an illustrative 8 per month (96 a year) to cover a 400 device, you're pre-paying a quarter of the device's value annually to avoid a one-time, survivable cost. Carry that risk yourself and insure the things that could actually end your financial life.

Build a self-insurance buffer deliberately

Carrying small risks yourself only works if the money is genuinely there when the risk lands. Otherwise "self-insure" is just a nice word for "uninsured and hoping." The fix is to treat your emergency fund as a real self-insurance pool with a rough number attached. A practical rule of thumb: add up the deductibles you've chosen across all your policies, plus the cost of the small stuff you deliberately don't insure — the replacement phone, the appliance that dies, the vet bill — and make sure your buffer comfortably covers the worst plausible cluster of those in a single bad year. An illustrative example: if your home and car deductibles total around 1,500 and you self-insure a 900 laptop and a 600 appliance, a buffer that can absorb roughly 3,000 without touching rent money makes self-insurance real rather than theoretical. The payoff is twofold. First, you can raise deductibles on the policies you do keep, which lowers premiums, because a higher deductible is simply self-insuring the first slice of each claim. Second, you stop filing small claims that trigger premium increases or non-renewal, keeping your record clean for the day a genuinely large claim matters.

Why you insure the person, not the payout

A common beginner mistake is buying cover around a specific object — the car, the phone, the trip — while leaving the human being behind it exposed. The costliest gaps are almost always about lost human earning power, not damaged things. Consider two people with identical savings. One insures the phone, the laptop, the bike and the holiday, and skips income protection because it felt abstract. The other skips all the gadget cover and insures against being unable to work. If a back injury or a long illness stops the first person earning for a year or two, no gadget policy helps, and the savings that were meant to be a buffer get drained paying ordinary bills. The second person keeps a monthly income and their savings intact. The mental reframe that avoids this: for each risk, ask "could this event stop me earning, or force me to pay someone else a life-changing sum?" If yes, it's existential and goes first. Your ability to earn is usually your single largest asset — larger, over a career, than a house — yet it's the one people forget to protect. Cover the earner before the earner's toys.

The overlap and gap audit

People rarely have too little insurance in total; they have it in the wrong places — double-covered on trivia, exposed on the big risks. Once a year, list every premium you pay, including the ones bundled invisibly into a bank account, a credit card, an employer package, or a product warranty. Two failures show up almost every time. The first is overlap: travel medical cover you're already paying for through a card, or accident cover duplicated across a work benefit and a private policy, where in a real claim you typically can't collect the same loss twice — so you're paying two premiums for one payout. The second is the silent gap: a genuine existential risk with no policy against it at all, which the object-by-object buying habit tends to leave uncovered. A simple audit sequence: write each risk in one column, the policy covering it in the next, and the premium in the third. Cross out duplicated cover and cancel the weaker overlap. Then look for rows with a serious risk and an empty policy column — those gaps are where next year's premium money should go. Do this before any renewal auto-charges, because inertia, not price, is what quietly keeps bad coverage in place.