Even though many of us grumble about paying insurance premiums, the reality is that insurance is necessary for many of us. Insurance is designed to help us cover the costs associated with replacing expensive assets. Whether or not you need insurance depends on your particular situation.

What Do You Own?

Your first step is to consider what you own, and how much it would cost to replace it. “Consumers should have auto, home, and renters insurance if they own any of those items,” says Liran Hirschkorn, founder of BestLifeQuote.com. “There really is no negotiating there. If your home burns down and you don’t have coverage, you’re left with nothing.”

The same is true of a car. Most of us can’t just pull out cash for a new car when the old one is totaled. Insurance helps you manage your finances. Renters insurance makes sense for those who wouldn’t be able to replace the items in their apartment or rental home on their own, just paying cash.

In some cases, you are required to carry insurance. If you borrow to buy your car, the lender might require you carry insurance so that the loan can be paid off if something happens to the vehicle. Many mortgage lenders also require home insurance. In some cases, it might even be the law. In the United States, all 50 states require you to carry liability insurance on your car.

Take stock of what you own, and what it would cost to replace your items. If you can’t easily replace what you own, insurance is necessary. It’s much easier to pay a small monthly premium than it is to try and cover the entire cost of replacing lost assets. Don’t forget about valuable individual items, either. If you have a boat, you might need coverage for that item. Other valuables, such as fine or heirloom jewelry, or artwork, might require special insurance if they are expensive enough that your homeowners or renters policy wouldn’t cover them.

Covering Yourself

Other insurance isn’t so straightforward. Health insurance coverage in the United States is now mandated by law, but it still makes sense to have private health coverage. After all, one hospital visit could push your finances over the edge. Even in Canada, it might make sense to get a certain amount of private health coverage if you are concerned that your government-provided coverage isn’t quite going to do it. Evaluate your situation and determine what makes sense for you.

Life insurance is another type of insurance that comes with question markets. “Life insurance is more circumstantial,” Hirschkom points out. “If you have someone who relies on you for financial support, or if you have outstanding debts and don’t want to leave your family with that debt, you need life insurance.”

He also looks at other situations where life insurance might make sense. “If you have a key person in your business, and their death would cause a major revenue drop to the company, you should have coverage on them.”

Most families can purchase a decent amount of term life insurance coverage for an affordable cost. Life insurance can provide you peace of mind when you are concerned about your family, and what is likely to happen to the finances later.

It’s also important to take stock of your work situation and consider disability insurance. While government disability benefits can help you through the tough time, you need to be careful. It’s not always enough to completely replace your income. Disability insurance can help you with that. Consider the options, and whether or not your family would be ok if you were hurt and unable to work. Many people consider their death, and get the right life insurance, but the truth is that you are more likely to find yourself in a position where you are unable to work.

What About Self Insurance?

Another option is to self insure. If you have the resources, or you build up a good emergency fund, there are some types of insurance you might not need. You might be able to drop the collision and comprehensive coverage on your car, keeping only the liability. Or perhaps you won’t need short-term disability insurance with the right resources.

Evaluate your situation and figure out how to make sure you are properly protected so that you don’t run into serious problems later on.