The last post discussed insurances that are ‘must-haves’ or should be seriously considered. This post will cover some insurances which are rip-offs and not worth the money in almost every case. To review, insurance is about decreasing risk. In almost every case, purchasing the following insurance coverages puts the odds in favor of the insurance company. You will be paying for coverage you do not need.
Life insurance for children
The purpose of life insurance is to replace lost income. As a rule, kids don’t provide any income to the household. Adding a small amount of insurance through your employer may have some value. This coverage is usually enough to cover final expenses and should cost less than $5.00 per month for ALL your children combined.
Some whole-life-policies claim to help you save for college, but you’re much better off investing in an Education Savings Account (ESA). Speak with your investment advisor about your options and the best fit for you.
Accidental Death Insurance
This type of coverage only pays out if the insured person dies in an accident. There really is no need for this, as a term life insurance policy will do the same. It’s extra money you don’t need to spend.
Mortgage Protection Insurance
This insurance will pay off your house if the insured person dies. Again, there is no need for this additional coverage as a term life insurance policy will take care of this, and it is money better spent on investing.
Supplemental Medical Insurance
This covers expenses your medical insurance policy does not cover, such as deductibles. Good medical insurance plus an emergency fund will cover this gap just fine.
Cancer Insurance
Again, your medical insurance and emergency fund will cover your expenses for any disease, including cancer.
Whole Life Insurance
Whole life insurance has a built-in savings plan. Unfortunately, these plans have lower interest on the investment portion and may not keep up with inflation. You will do much better investing in an IRA. We will cover this in an upcoming post.
Flood, Earthquake, or other natural disaster insurance
This coverage covers “acts of God” not usually covered by a traditional homeowner’s insurance policy. There may be value in these coverages but that is determined by the chances of one of these “acts of God” in your area.
Airline Flight Insurance
This pays out if your plane crashes, blows up, or another situation is out of your control. The odds of this happening are so slim that you may do better playing the lottery (which I do NOT recommend either).