Insure losses your household cannot absorb; use emergency savings for smaller ones
Premiums fund claims, administration, sales and profit. Insurance is most useful for rare losses too large to pay yourself, such as major illness, injuring someone while driving or losing a breadwinner. Savings can cover manageable small losses.
What it takes
Free to review. Spend half an hour listing major possible losses and comparing them with savings.
What you may gain
Only part of premiums returns as claims; the rest supports costs and profits. Since 2021, Chinese sellers of individual short-term health insurance must publish comprehensive claims ratios on their websites every six months, broadly showing claims relative to premiums. Insurance therefore generally costs more than the average expected claim but converts a potentially overwhelming one-off loss into manageable annual payments. The smaller and more affordable the loss, the less useful that exchange. Relevant examples are one-year medical coverage, motor third-party liability, overseas medical coverage, and term life for dependents.
Context & considerations
Grade C because this is a decision framework, not an official calculation of which products pay off. If you can absorb a few hundred renminbi, screen-breakage or flight-delay insurance may be unnecessary under this framework. Critical-illness cover can replace income during illness-related work absence; people able to fund one or two years away from work may consider foregoing it. Basic medical insurance is social insurance and should not be judged this way; keep resident coverage. Use emergency savings for small losses. Benefits accrue to you and your family.
Research & references
General Office, China Banking and Insurance Regulatory Commission (2021). Notice regulating short-term health insurance, document No. 7, including half-yearly website disclosure of comprehensive claims ratios. https://www.gov.cn/zhengce/zhengceku/2021-01/12/content_5579193.htm