1. Buy insurance to cover the big lossses, which has a small chance of occuring. For example, total destruction of a property due to fire, or a major accident. You can insure the risks where the chance of occuring is less than 1% in a year.
2. Pay small losses out of your savings, eg deductible under a medical insurance or motor insurance policy. Do not insure these small losses. It is costly, as you have to pay a loading to cover the expenses of the insurance company. It is also a hassle for you to make a small claim.
3. Buy low cost insurance just to cover the risk. It does not matter that you do not get any return, provided that the cost is less than 5% of a similar "investment product".
4. Do not invest in an insurance policy, as the return is low (due to the expenses). It is better to invest separately in a transparent, low cost product.
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