When I was in my early twenties, newly married and starting out, there were not the insurance options that there are today. You were expected to insure your car, your home if you owned one, life insurance if you had a family, and to have health coverage, but that was it. These days there are so many kinds of insurance. You can choose to insure your travel, your pet, your wedding, and your purchase of almost any size. Are these new insurance options good things?
Insurance. It seems like there is an insurance policy for everything these days. Although it is important to have insurance for your family’s future, many of the available policies are a waste of money. Here are 10 of the most common offers you will encounter and should try to avoid.
Life insurance for children– The purpose of life insurance is to cover the living expenses of the people who depend on you should you die. Unless you have a major child star on your hands, nobody is depending on their children for income. Millions of these policies are in existence. The people who sold them should be ashamed of themselves.
Warranty insurance and maintenance policies or programs– These policies cover repairs that are not covered by the warranty that comes with the product. The odds are in your favor if you opt to skip the insurance and just cover the expense should it arise.
Mortgage protection life insurance– The idea behind these policies is that your home will be fully paid off should you die. If you think about it this is really no different than life insurance, the only difference being that the premium will be a lot higher, sometimes by as much as 200% more. If you feel you want this type of coverage, increase the size of your term-life policy. It’s a lot cheaper way to go and offers more flexibility for your family to use the money should something happen to you.
Credit card theft insurance– Federal law limits consumer credit card liability for unauthorized charges to $50. These types of insurance are normally pure scams. The FTC (Federal Trade Commission) singles out credit card theft insurance as the biggest type of scam out there today. But there is a loophole. The $50 liability limit does not include debit cards (nor does credit card theft insurance). Most financial institutions also cover you on your debit cards but, to be sure, call and find out. If they do not cover you, move your money to an institution that does.
Identity theft insurance– For the most part, these plans do not reimburse you for the money you lost, just for the expenses incurred if your identity is stolen, such as phone calls, copying fees, and lost wages. By and large they probably aren’t worth it.
Credit life insurance/credit card balance insurance– These policies pay off your credit debt if you die. This is that same situation where the premiums are ridiculously high compared to term-life insurance rates. This is another attempt to play on your emotions or take advantage of your good will toward your family.
Trip insurance– Such insurance reimburses you should you be forced to cancel a planned trip, etc. This is almost surely a losing proposition. Insure this risk yourself by being willing to cover any amount(s) that might be lost.
Flight insurance– This is extra life insurance in case you’re killed in a plane crash. Do you have any idea how few people are killed in the world this way each year versus the number of passenger trips taken? This is a terrible deal. Pass on it.
Travel life insurance– Travel life insurance pays you should you die while traveling. It preys on people’s fears and is just one more bad deal. If you need life insurance, you should already have the appropriate policy in place. Betting that if you die during your trip your family can get more money is a bad bet, given the rates involved. Also, you’d be surprised at the loopholes in these deals regarding how much you’ll get and whether you’ll even get paid at all.
Wedding insurance– This covers the added cost that might occur should the wedding be postponed due to illness on the part of the bride or groom, missing vendors, damage to the reception site should the place not have its own insurance, etc. Once again, the insurance company will have done its homework. What is covered, and the rates charged, makes it a winner for the company, not you, even given all of the marketing and selling expenses the insurer pays out. By the way, these policies do not pay off if either the bride or the groom changes her or his mind.
Insurance is important, but be money smart and don’t waste your hard earned money on these expensive and ultimately useless policies.
