Five Insurance Policies That You Do Not Need

by Hank Coleman

Overseas flight insurance vending machines in the airportI 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

Cancer Insurance

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.

Flight Insurance

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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Pet Insurance

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.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 589 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 6 comments… read them below or add one }

Newlyweds on a Budget

I agree that pet insurance is a waste. A lot of policies don’t even cover serious illnesses, which is the whole point in the first place!

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shanendoah@the dog ate my wallet

I have Accidental Death and Disability insurance through my job. So in that sense, in order to have disability, I have to have the accidental death.
As for pet insurance, most pet insurance is incredibly limited. In almost all cases it will not pay for the most common breed issues- like hip dysplasia in GSDs or eye problems in Sharpeis. In other words, it’s useless for the problems that your pet is most likely to face.
Pet insurance might cover routine visits (or it might not), but mostly it’s there to cover your pet being hit by a car. And that’s scary, but not likely.
Pet owners are really better served by having a pet fund- take the amount in premiums you’d pay every month and put that in an account specifically for your pet’s medical bills. Almost always, you’ll come out ahead.

Reply

Hack @ Smart Money Hacks

I agree with these, though we had quite the scare with our pet last fall. After a $475 visit to a big pet hospital, we learned that she has a genetic condition that needs to be watched closely. Haven’t had problems since. Two years of pet insurance premiums would have been less than the visit, but you just never know.

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Elizabeth @ Simple Finance

My husband has accidental death in his work coverage – he’s a law enforcement officer, and this policy actually kicks into overdrive if he were to, say, be killed on the job. Since he doesn’t pay anything for it (it’s standard with his department’s benefits), I’ll take it!

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Amanda L Grossman

I looked into cancer insurance several years ago because I had never heard of it. I ended up not buying.

Reply

Alberta

When looking for insurance policy, it is really important that we know which ones are needed and not needed to avoid wasting the cash that we worked hard for. Pet insurance and cancer insurance are probably not going to be in my list. It is important to prioritize what we and our family can rely on when such a bad situation knocks on our life.

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