You can purchase insurance for everything. The important items, though, are the ones that will financially ruin you if they occur. Get health insurance and disability insurance to protect you if you get hurt or sick, and buy some business insurance if you run your own company. Life insurance will provide for your family if you die. Don't insure sentimental items, or get a policy on an event you think is likely to happen.

Trying to figure out what assets to insure is a lot like buying a new car. You have a rough idea of what you're looking for, but so many options are available, and each one is apparently vital. So how do you figure out what type of insurance to buy?

Go for the big items

When trying to decide what to insure, only insure the big items. Remember that you have to pay to have insurance, so make sure that whatever is being insured is worth the money you're paying. A good rule of thumb is to only insure against losses that could ruin you financially if they occur.

Some of the best insurances to get are:

Health insurance. The current cost of healthcare is staggering. A hospital stay can easily run into the hundreds of thousands of dollars, and that's not including any prescriptions you'll have to buy afterwards.

Business insurance. If you run your own business, insurance is vital. You never know when a dissatisfied customer is going to file a negligence claim against you for several hundred thousand dollars. Business insurance can save both yourself and your business if something goes wrong.

Disability insurance. What if you were in an accident and unable to work? Disability insurance covers this by providing you with a stipend to make up for your lost income. While blue-collar workers such as carpenters and factory workers are the ones who can use this the most, an accident can disable anyone.

Life insurance. The cousin to disability insurance. Even though you won't be around to get the benefit of life insurance, your family will be able to avoid economic hardship from your passing. This is especially true if you're the primary earner.

Homeowners insurance

Outside of your health and your business, your home is one of your most important investments. If you have a mortgage, the bank will require you to purchase a home mortgage insurance policy. Once you own your home outright, you can decide whether to insure it or not.

While losing your home may not be as financially devastating as a lengthy hospital stay or a multi-million dollar lawsuit, the cost of rebuilding and refurnishing a home is enough to convince people to get homeowners insurance. If you decide to purchase a policy, make sure it covers loss of personal possessions.

Auto insurance

Should you get auto insurance? If you're paying off an auto loan, you may already have auto insurance in order to protect the bank's investment. Even if you own the car, your state may require you to purchase an insurance policy that covers liability and driver protection. This is especially true in no-fault insurance states such as Michigan.

If you want to purchase insurance above and beyond the bare-bones policy, consider what type of car you're driving, as well as your net worth. If you own a Corvette, for instance, you'll definitely want collision coverage. You'll probably also want a comprehensive physical damage coverage to prevent it from any other type of mishap. If your car is a clunker, however, you may not even want to get collision insurance on it.

Don't insure sentimental items

While insuring big items will provide you the best return on your investment dollar, you may want to insure smaller things that mean a lot to you. Expensive jewelry such as engagement rings is one example, and you might want to insure your pets as well.

If something does happen to your engagement ring or your pet, though, an insurance policy is not going to bring them back. Invest your money in a good safe or safety deposit box, and spend some time keeping your pet fit instead.

Don't play the odds

You may also want to buy an insurance policy on something that's likely to happen, such as spending money on collision insurance for a car or taking out insurance on a package that is lost in the mail. After all, these events happen more often than you having a health crisis or being sued for millions of dollars

The problem with this belief is that you're taking a bigger risk gambling on the likelihood that you won't have to go to the hospital versus gambling on the likelihood that you'll get into a car accident. A car accident can be a financial hassle, but it won't ruin you. Paying off a week-long hospital stay, on the other hand, might.

You'll also be paying higher premiums on collision insurance than you will for the big item policies. Insurance companies have invested a lot of effort into figuring out how likely an event is to occur, and they price their premiums accordingly. Trying to play the odds versus an insurance company is a losing proposition.

The most important considerations that people sometimes question are health insurance, business insurance, and disability insurance.