10 insurance policies you don't need
If you’re like most people, you don’t relish spending money on insurance. So it’s very aggravating when you find out you’ve purchased insurance that you don’t need. Fear sells a lot of insurance, so a good rule of thumb is to purchase insurance only from an insurance provider and to buy policies that are comprehensive.
So, what kind of insurance would you need? You would need a term-life policy to cover your contribution to the family’s expenses; a comprehensive health policy (or membership in a managed-care plan); disability coverage providing income when you can’t work; and homeowner and auto insurance to replace lost property. If you have these, you don’t need the following 10 policies.
- Mortgage life insurance. This policy, generally purchased from a lender, will pay off your mortgage if you die. The cost can be three-five times as much as comparable term life insurance for a benefit whose value declines as the mortgage is paid down. Instead, rely on term life.
- Credit-card-loss protection. It pays off losses if your card is stolen and the thief goes on a spending spree. Plans average a cost $7 – $15 a month. But federal law limits your loss to $50 per card. Instead, it’s recommended that you put credit-card numbers in a safe place, and report lost cards ASAP.
- Car-rental insurance. For $8 – $11 a day, it covers damages to cars and people if you are in an accident while driving a rental agency’s vehicles. Check to see if your credit card or your own auto policy has such coverage. If you do, don’t bother.
- Flight insurance. Specialty travel-insurance companies sell life-insurance policies that pay a benefit if you die or are dismembered in a plane crash. Depending on the amount of insurance you buy, you pay $15 – $60 per flight. This insurance is not needed, because term life will cover you if you die in a plane crash, and health insurance should cover medical expenses.
- Cancer insurance. Marketed by specialty-insurance companies, these plans supplement health insurance for cancer-care costs. Annual premiums range between $200 to $3,000. Despite their high cost, the policies may not cover outpatient care. Chances are that your existing health insurance already covers cancer expenses.
- Credit-life insurance. Credit-card companies, banks, and other organizations financing a purchase or lending money offer policies that repay a loan if you die. Average payout is $4,500 for a yearly cost of $23 That’s a lot of money when a healthy, nonsmoking man of 40 can buy $100,000 of 10-year level term coverage for about $100 a year. Instead, ensure that you have enough term life to cover loan payments.
- Credit disability insurance. This policy typically pays up to 36-month installments on a loan if you are disabled. A policy may cost $21 per $1,000 of coverage. Your best bet is making sure that your disability plan covers your expenses, including any loan payments.
- Involuntary unemployment insurance. Credit-card companies and other lenders market this policy which makes minimum payments on a credit card or car loan for 6 to 12 months if you lose your job. The cost is $0.70 per $100 of your credit card balance. Instead of getting this insurance, create an emergency fund that will cover 3 to 6 months of your expenses.
- Accidental-death insurance. Your heirs collect a benefit if you die in an accident. The cost of this insurance runs about $600 a year. However, only 5% of those who die each year do so in accidents. It’s best that you stick with term-life insurance because it pays regardless of the cause of death.
- Identity-theft insurance. Sold by banks, credit-card issuers, and specialty insurers, it covers the cost of repairing your credit and, in some cases, attorney’s fees. Policies cost $20 – $180 a year for up to $25,000 in coverage, and it doesn’t include unauthorized charges or funds siphoned from accounts. Instead, you would be wise to check your credit reports regularly. The FTC anticipates issuing a final rule this summer giving consumers the right to order one free credit report a year from each of the three main credit bureaus.