Things to Watch Out For
In Part 1 I talked about types of insurance that you should not be without. Here in Part 2 I will discuss certain types of insurance that could be completely unnecessary, costly, or even scams.
After your essentials are insured, such as your home, vehicles, life and health, you may still hear about many other types of insurance people are trying to sell you. The first piece of advice that works across the whole spectrum of insurance is to not buy on price alone. Obviously you want to save as much money as possible, but when it comes to insurance, buying something cheap can end up costing you much more. Be wary of TV ads and internet specials boasting low premiums. Ask yourself, how are they able to provide insurance for so little? Usually there is something missing or certain restrictions that could prove costly in the event of a claim.
Another type of insurance that is getting more attention lately is mortgage life insurance. What is this? It is simply a policy that promises to pay your mortgage payment in the event you are disabled or die. That sounds pretty good right? There are a few reasons this can be a bad idea. First, you are just overlapping life insurance. If you have a life policy, if you die, your beneficiary receives a benefit. Adding an additional life benefit strictly for the mortgage is just adding extra premiums to cover the same thing. It may make sense to still purchase this because it would remove a mortgage liability from the surviving spouse, but is that always a good idea? The surviving spouse may actually benefit more from continuing to pay the mortgage to see additional tax benefits and put the life insurance proceeds to work in other investments. There can be cases where it may be a good idea, but for most people it is likely a waste of a premium. Before purchasing this insurance please consider your individual situation carefully.
Another type of insurance to carefully research before purchasing is travel and flight insurance. Again, these may be policies you need, but first check your current health and life policies to see how they handle incidents during travel or flight. In many cases there is some sort of coverage. Also, be sure to check your credit card when making travel or flight arrangements. Many offer automatic protection of some sort when you purchase tickets with their card.
Finally, a new type of health insurance policy has become more popular, and that is cancer insurance. Don’t waste your time with this one. Generally speaking, your primary health insurance will cover medical expenses related to cancer treatment. Cancer insurance also does not generally cover skin cancer, the most common form of cancer. And finally, most cancer policies also do not cover outpatient expenses. So, unless your health insurance explicitly does not cover cancer treatment, or a cancer policy will absolutely cover you for something you have a good chance of getting it is generally an expensive mistake.
Now that we know what insurance we need, what insurance we need to avoid, Part 3 will discuss how to find the best policy for the money.
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.