Insurance is designed to offer you protection against unforeseen circumstances. As responsible adults, we want to make sure we are covered – our homes, our possessions, our cars, and our health. We take the time to research and consult on all matters involving insurance and spend thousands of dollars to ensure we have the best. But sometimes, we find ourselves buying insurance policies that we do not need or are not right for our needs. This is a waste of our hard earned money. Here are 5 types of popular insurance policies that hardly anyone needs.
Insurance For Children
You can ensure pretty much anything, even your children. But just because you can insure something doesn’t mean you should. Children’s Insurance policies fall squarely into this category. We constantly fret about our children’s health and well-being but the reality is that the odds of a child passing away at a young age are less than 0.25%. It is therefore very unlikely that we’ll ever use this policy. In addition, children do not contribute to the families income and so their untimely death would not impact the families finance. I realise this is a cold and purely financial way to look at it but that’s all insurance policies are. To hedge against financial loss.
If you or your spouse’s family have histories of genetic and health problems and that would pose a risk to their lives, then you could consider taking a small insurance policy. If you think that their health problems may make them difficult to insure in later life then it may be smart to take one out now. Let us be clear, however, a child’s life insurance policy does not guarantee future insurability.
Given the odds and risks, it might be better to just invest your money for your child’s college education. The chances of them needing that are much, much higher than needing life insurance.
Umbrella Insurance Policies
Umbrella policies are there to add on to your standard policies. While they are a good idea for a small number of people they are a waste of money for most of us. It’s protection for those “above and beyond” possible problems you could encounter. But the chances of you getting into a situation where you will need more are quite low and do not apply to most people.
One situation where an umbrella policy might be a good idea is if you have a renters insurance policy but want to increase your coverage from whats available on your existing account. Before considering it however you should find out if it’s cheaper to just increase the premiums on your existing insurance and increase the cap as a result.
Whole Life Insurance
Whole life insurance is more of a permanent type of insurance. The aim of life insurance is to provide for your family when they suffer a financial loss upon your death. It’s basically what term insurance does best. Whole life does it too, but quite horribly, and its generally a terrible investment.
Whole life insurance is partly an investment where they claim that you get cash value over the years. While that is true, most of what you get gets eaten away by costs and fees since the cost of whole and variable life insurance is expensive. Insurance wise, whole life premiums costs ten times as much as similar term life insurance policies, so it’s a pretty expensive policy to get. In short, you might get less coverage in a whole life insurance policy than you would a term life policy, even if you pay more on whole life.
The financial cost of death, regardless of cause, is the same. From a financial standpoint, means of death is unimportant, and this can be covered by low-cost term life insurance. It is unnecessary to buy additional policies such as accidental death or mortgage life insurance policies.
You ever wonder why sales people push you to buy extended warranties on your mattresses or electronics? It’s because they are incredibly profitable for the retailer. Most warranty policies defects and bad workmanship but do not cover the most likely cause of damage to the product – accidental damage such as dropping a phone, knocking over a TV or setting fire to something. So if you’re worried about your kid throwing something at your expensive TV you are better off buying a tempered glass protective screen than investing in an extended warranty. If you are talking about an item that is known to get damaged, despite careful use, then maybe the extended warranty would benefit you. Bottom line, do your research on the product before buying an extended warranty.