Three Key Rules for Being Properly Insured

Here are some thoughts from the wonderful book The Bogleheads' Guide to Investing (I LOVED the book -- see my rating for details) on three key rules for being properly insured:

1. Only insure against the big catastrophes and disasters that you can't afford to pay for out of pocket. The cheapest insurance is self-insurance.

2. Carry the largest possible deductibles you can afford. The larger the deductible, the more you are self-insuring and the cheaper the premium will be.

3. Only buy coverage from the best-rated insurance companies. You need insurance companies you can depend on when you need to file a claim.

These three pretty much sum up my thoughts on insurance and how I handle insurance personally. The one thing I would add is that in order to have high-deductible insurance, you need a bit higher-than-average emergency fund -- just in case you need to cover the deductible in the event of a major disaster.

For more tips on getting and saving on insurance, see Best of Free Money Finance: Insurance Posts.