Advice on buying insurance

Some people asked for my advice on the need to buy certain types of insurance. I told them to ask the following questions:

1. What is the risk that is being insured?
2. What is the amount that can be payable under the insurance?
3. What is the chance of a claim arising?
4. What is the premium payable for the risk?

Look at the ratio of claim to premium for the class of insurance. If the ratio is 70%, then the insurance is giving good value to the customers. If the ratio is less than 50%, then the insurance company is making excessive profits, i.e. they are over-charging the premium.

You should also consider the following:

1. Do you really need the insurance?
2. Can you carry your own risk, e.g. for the deductible under medical insurance?