When we bought our first house in San Francisco, we chose the homeowners insurance with the lowest deductible. In the first year of home-ownership we experienced two losses. The first winter in our house was an especially rainy one. The skylight in one of the bathrooms leaked, ruining the drywall on the ceiling. The insurance adjuster told us that repairing the leak was not covered but patching the drywall was. My dad did that for us at a cost of less than our deductible.
Then one sunny weekend, Doug came back from golfing with a friend. His friend dropped him off and Doug deposited his golf clubs in front of our garage door. He came inside, told me about his day, and then went down to the garage to open the door and bring in the clubs. The clubs were gone. The cost of the clubs was more than our deductible, so we did get some reimbursement from the insurance company for that one.
And then we paid for it.
The premium went up the following year by more than the insurance claims. They offered us an alternative: absorb a smaller increase in premiums by significantly increasing our deductible.
I learned my lesson. Don’t use your insurance. It will cost you in the end. It’s much better to use insurance as a safety net for catastrophic events. A few hundred dollars of damage or theft can easily be covered in the normal course of your budget (with lessons learned to be more careful where you leave your stuff.) What you really want insurance for is the big stuff, the events that would devastate your budget like a fire or an earthquake.
Which is the same approach I now apply to medical coverage. Pick up the tab yourself for the few hundred dollars a year you spend on your annual check ups, mammograms and dental cleanings. What you really want coverage for is the cancer, heart attacks, and broken bones. Especially if you are healthy, a high-deductible health-plan coupled with a tax-deductible health savings account is probably your most economical choice. For those that are retiring (or out of a job) before being eligible for Medicare, my advice about securing health insurance is in my U.S. News post, How to Find Health Insurance in Retirement.
This is a post from Retirement: A Full-Time Job.