What Insurance Policies Can You Skip?

Yes / No to insurance

Most individuals look at insurance as a great investment in protecting their assets and peace of mind and most of the time they would be right. Every situation is different however,and there are some policies that may not be worth paying into.

Flight Insurance

Flight insurance typically protects passengers in the case of death and bodily damage if they were killed or injured during the flight. Air plane crashes are far less common than car crashes, but if that’s not enough to dissuade you consider that if you already have life insurance and medical insurance you are already covered and there’s no need to buy more.

This is not the same as Travel Insurance, which will pay medical claims if you are outside your network or outside the country on a vacation.

Flood Insurance

Flood insurance protects your home against damages that could occur during a flood. The insurance companies that market this type of insurance will likely bring up that floods are not usually covered in homeowner’s insurance and that tends to be true, but if you live on a hill or in a place not likely to be flooded flood insurance could be a useless investment. ┬áIf the mortgage company requires it as part of the loan, then you have no choice and it usually means you are in a flood zone.

Unemployment Insurance

If you purchase this type of policy it will likely be an unnecessary expense. This kind of coverage will make minimum payments on your bills in the event that you are out of work. If you have paid into social security you most likely have some protection already, as well as at work in the case that you were fired or laid off. You would probably be better off saving your money unless you haven’t been working long and feel you are at high risk for losing your job.

Accidental Death Insurance

Accidental Death Insurance is exactly what it sounds like, a policy that pays out in the case the insured dies in an accident. Once again if you already have life insurance you don’t need accidental death insurance. Only around 3% of the population will die of an accident, so there is a very high chance that premiums paid for this type of coverage will just be money down the drain. Accidental Death Insurance is infamous for having long lists of exclusions that could mean the insurance company denies the claim on your death if the incident doesn’t meet their exact specifications.

Water Line Insurance

The underground plumbing that brings water from the street under the ground you own into your home can sometimes leak or break. You are responsible for whatever plumbing is located on your property in the case of repair. These repairs usually cost a little over $2,000 and aren’t usually covered by homeowner’s insurance.

If your home is a newer build, the piping under your home and yard should be new too. The likelihood of having to use this type of insurance would be very low for you. You could be better off saving money for an emergency fund so that whatever does come your way, you will be self-insured.

Credit Card Loss Insurance

The thought of someone stealing your credit card and racking up a ton of fraudulent charges can feel scary, but there’s something a lot of people don’t know. If your credit card is stolen and you report it, the most you can be charged is $50 per stolen card and that’s federal law.

Credit Card Loss Insurance would therefore be protecting you from probably around $150 worth of loss if your wallet was stolen and you had 3 credit cards inside of it. It’s probably not worth the premiums.

Life Insurance for Children

Unless your child has already has been diagnosed with a chronic ailment, the likelihood of losing them before adulthood is not great. Some parents choose whole life or universal life insurance to build cash values for their children’s college educations or retirements. It’s important to examine the features of different policies to determine if that is an avenue that is suitable for your financial goals.

Most of the time it would be better to invest in a college savings fund or retirement fund, but there could be exceptions. Term insurance provides no cash value to the policy owner so it may not be a wise choice to put on children, since there will likely be no return on investment.

Disease Insurance

This type of insurance protects the insured from costs they could be subjected to in the event they develop a critical illness. Some policies will cover a wide range of chronic diseases, while some may only cover a specific infirmity like heart disease or cancer. Fortunately, if you already have health insurance it should give you coverage for these types of maladies, so there is probably no need to have additional coverage.

Automobile Collision Insurance

Usually if you purchase a vehicle by using a loan and not paying for it all at once, you have to take out full coverage auto insurance and keep it on the vehicle until the loan is paid off. Liability protects others against damage done that is your fault, but collision protects you against damage that could be anyone’s fault including your own. If your vehicle is paid for and older you could be better off using the money you would put into collision coverage into saving up for a new car for when you need one.

Rental Car Insurance

rental car insurance

Your auto insurance provider possibly mentioned this type of coverage to you when you signed up for your car insurance This type of coverage will cover the cost of renting a car in the event your car is involved in an accident and you need something to drive while it is in the repair shop. Though it could come in handy, you could probably just save up for that kind of thing.  Nowadays, most households have more than one car to drive or a person can arrange carpooling with a co-worker.

Car Rental Damage Insurance

This type of coverage protects an individual from having to pay damages to a vehicle they rented. Typically this coverage is offered by the rental company at the time picking out the car. It’s advisable to check with your personal car insurance provider to make sure you aren’t already covered under their plan, since you wouldn’t want to pay for coverage you already have. You also want to check with your credit card companies as many of them have rental car damage coverage included in the use of their card.

Extended Warranties

extended warranty

If you’ve ever purchased any type of appliance or an electronic device from a big name store, you were likely offered an extended warranty at the register. Buying this kind of coverage is presumably not in your best interest. If you bring your item home and it doesn’t work properly, you should be able to take it right back to the store for a replacement or get your full refund back. Also if the device you purchase breaks after you’ve had it a while, you will probably be one of many dissatisfied customers that the company will want to settle with without going to court.

Private Mortgage Insurance

Private Mortgage Insurance is often mandatory if you put down less than 20% of the cost of home you are purchasing as a down payment. This coverage protects the lender in case the borrower defaults on the loan and the borrower pays for this coverage monthly by having an increased mortgage payment. If you can afford to pay more towards the down payment to get out being forced to pay for PMI by all means, do it. It will save you money in the long run.

Credit Card Insurance

This coverage is designed to make payments on credit card debts for you in the case that you are unable to do so. Typically these types of coverage are full of stipulations that could prohibit your claim from being accepted and if it is accepted, they may make only minimum payments and not pay off the entire debt. With most insurance, purchasers get a policy to protect against things they have no control over. In this case, the credit card holder does have control. By not maxing out their cards and paying back the money they borrow every month, they can avoid needing any sort of protection plan.

Mortgage Life Insurance

Mortgage Life Insurance pays off the mortgage in the event the payer dies before the home is completely paid for. It sounds like a good thing to have but there is a better option, term life insurance. Mortgage Life Insurance goes straight to the lender at the time of the insured’s death, not to their family members. With term life insurance the owner of the policy can designate the beneficiary/beneficiaries of their choice. Mortgage Life Insurance only pays off the home, no other expenses like funeral or loss of finances. Purchasers of term life can get enough coverage to pay off their home and cover additional concerns depending on their budget. Term life insurance is usually inexpensive compared to other forms of life insurance, since the likelihood of it having to pay off a claim is low. Mortgage Life Insurance premiums tend to remain level even though the benefit amount decreases over time since mortgage holders will pay down the debt over the years; this different from term life where the premium is based on the amount of coverage.

Even though most of the types of insurances mentioned in this article come with very cheap premiums, they can be big money-makers for the insurance companies since there isn’t a high chance of them having to pay out to the policy owner or beneficiary. Before putting money into any of these protection plans, consider if you really need them and if you may already be covered through insurance you already pay for.

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