3 Types of Insurance Policies You Don’t Need – Undoubtedly there are several types of insurance that everyone should have. Auto insurance, health insurance, and home owner insurance (if you own a home) easily make the top three.
Insurance is big business and new products and policies are regularly created to meet all kinds of needs. Some may clearly be unnecessary, while others may sound like a good idea. If you have no knowledge of financial planning, how do you determine what insurance you and your family should have?
I recommend starting with the types of insurance policies you need to make sure you have the basics that matter most. Once that policy is in place, you can branch out and consider other types of insurance that may be important in your unique situation (such as long-term care policy insurance to offset the rising costs of elderly care). And of course, you can determine which insurance policies are not included in your financial plan.
3 Insurance Policies You Don’t Need
While there are more than a few types of insurance policies that everyone should have, there are also some insurance policies that you really don’t need. While they may sound appealing in theory, in reality, you are probably wasting money paying premiums each month. The following types of insurance fall into the category of types of coverage that most people don’t need.
1. Mortgage Life Insurance
Mortgage life insurance is a policy that promises to pay your mortgage payments if you become disabled or die. If you are married this seems like a great idea, right?
Yes No. This type of policy really only overlaps with an existing insurance policy that you hope to already have through your company or through a separate policy (remember list of insurance that everyone should have?). In the event of death with a standard life insurance policy, policy beneficiaries receive benefits that can be used for any expense they choose, including paying a mortgage with you.
It is typical for financial planners to recommend that a life insurance policy be drawn up for an amount that covers not only the lost income of the deceased, but an additional amount to cover other expenses. Mortgage life insurance can be an expensive – and unnecessary – supplement to traditional life insurance. In the end, why pay an additional premium for something a cost-effective life insurance policy can cover?
What happens is that mortgage life insurance is very narrow in scope and, therefore, may not be the best use of insurance premiums. You are usually better off sticking with a good life insurance policy. You can always increase your life insurance coverage to offset your mortgage balance if that’s something you are most concerned about.
2. Travel and Aviation Insurance
Travel and aviation insurance policies offer other types of coverage where you pay a premium for insurance that may overlap with other coverage or benefits you already have. Before you spend money on travel insurance, check your current health and life insurance policies to see how accidents or injuries during travel or flight are covered. Most likely there is some kind of coverage included. And in the event of a disaster, your life insurance policy must cover you if you die while traveling.
If you use a credit card to book tickets or travel arrangements, you will also want to check with your credit card company to see if any travel protection is included with your account. Many credit card companies automatically provide benefits such as car rental insurance, lost baggage insurance or travel accident insurance as part of your cardmember agreement. If you still need additional insurance to maintain your peace of mind, you can always purchase a small travel policy to cover any gaps in existing coverage.
3. Cancer insurance / disease insurance
Critical illness coverage such as cancer insurance is becoming more popular as cancer rates and awareness increase. But is it really a worthwhile investment? While cancer treatment can come with some astronomical medical bills, you may want to hold off on taking out a cancer-specific insurance policy.
The reason? In most cases, your main health insurance policy covers medical expenses associated with cancer treatment. If you are worried that potentially expensive treatments, such as cancer treatment, cost you money once you reach your lifetime coverage limit, review your current coverage to see how much your health insurance policy can pay.
One of the surprising reasons cancer insurance policies can be a waste of money is that most cancer insurance does not even cover skin cancer, a leading form of cancer. Not only that, but cancer insurance usually does not cover outpatient costs associated with cancer treatment. And, there is always a chance that you may not get cancer at all. In that scenario, you have to question exactly what you are paying for this type of policy.
Unless your health insurance specifically does not cover cancer-related costs or you have a high probability of getting a certain type of cancer that a policy can cover, you are likely wasting money on premiums that you can use to meet other important needs. And in some cases, your primary medical policy may not cover you if you have additional coverage elsewhere for the same type of care. As with all types of insurance, make sure you understand the benefits and limitations before purchasing a policy.
And those are 3 types of insurance policies that you don’t need, I hope this article is useful and adds to your knowledge before buying certain insurance policies.