I hear what you say about over-insuring. We have cover on our lives to ensure that the debts are nearly covered (over $1M) and to cover our houses, and sometimes we take landlord cover depending on the tenants going in. Most of this is tax deductible.
We have income protection on my husband because without his income we would be severely affected and probably have to sell a house, and this cover is tax deductible too. But to reduce the premium we chose a six month lead time because he has enough sick leave to cover that.
We don't bother with trauma cover because we have enough buffer and backing from family that we don't need this.
What I don't understand is the common belief that insurance companies are all about ripping us off when time comes for a claim. I have never had any issues with any insurance claim that I have made over many years. We have never had a "big" claim like losing a house, but so far (touch wood) every claim has been easy, no fighting the insurer and the one time we claimed on our landlord policy, the assessor could not have been more helpful or generous.
Maybe we have been lucky
. I am rather cynical about lots of things, but so far, I have not been burned regarding insurance.