I recently asked J. Money’s readers a couple of weeks ago over at his site, Giveaways Are Sexy, which insurance policies after the normal life insurance, health insurance, car insurance, and home insurance that people should own. Some of the answers were great like recommending that people have renter’s insurance, umbrella insurance, or disability insurance. But, some of the other answers were down right scary. Here are five of my favorite insurance policies that I love to hate. You don’t need these five. Don’t waste your money on them.
Five Insurance Policies You Do Not Need
You should have proper term life insurance that covers ten years of your annual income. Having regular life insurance negates the need to have these specialty life insurance policies, and a term life insurance policy is cheaper than these additional coverages. Insurance companies prey on our fears, and there is nothing scarier these days than getting cancer. But, if you have the proper amount of life insurance, then you do not need specific cancer insurance.
Accidental Death Insurance
Dying is dying. It doesn’t matter if it was an accident. You should not need additional insurance that pays out extra if you happen to die in an accident. A regular life insurance policy will pay out whether it was an accident or not. Do not waste your money on these additional insurance policies.
This is another insurance policy that is exactly like accidental death insurance. Did you know that you can actually buy flight insurance in some airports from a vending machine overseas? If you were to extrapolate the amount of insurance premium for the small amount of coverage time that is covered, flight insurance would be one of the most expensive insurance policies that you ever bought.
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For most people, it would simply be cheaper to save for your pet’s medical needs. There are very few pet owners who need pet insurance. While it may make you feel better, it will end up costing you more money in premiums than you will ever collect by filing a claim. Insurance is designed to help you recover or prevent a catastrophic loss. Minor financial losses should be covered temporarily from your fully funded emergency fund.
Identity Theft Insurance
Identity theft is a hot topic right now, but that does not mean that you should run right out and purchase an insurance policy to cover you. While the Federal Trade Commission lists even a stolen credit card number as identity theft, it is a little more comforting to realize that completely stealing a person’s identity is extremely rare. The problem with identity theft insurance is that it is very specific on what it covers, and it only covers a few things such as legal fees and time lost cleaning up your credit report. It also only kicks in after any homeowner’s or renter’s insurance pays out. Also, you may be footing the bill first and getting reimbursed only after you prove that you have been a victim. If you are still worried, you can do what I did and freeze your credit report with the three credit bureaus and sign up for credit report monitoring through a company like LifeLock. Sign up for LifeLock Identity Protection today and get 10% OFF!
There is a danger to having too much insurance coverage. Insurance companies have professional, college educated actuaries whose sole job is to calculate the odds of the insurance company having to pay out an insurance claim. The insurance companies use huge historical databases to determine the likelihood of certain events based on a host of other factors. You can be sure that they have run the numbers and know for a fact that the expected value cost of paying out these claims is far less than what they take in on premiums. A vast majority of these insurances expire unneeded.