Unnecessary Insurance Policies You Should Avoid
Most of us don't like spending money on insurance. We'd much rather spend our hard-earned cash on home improvements, weekend get-always and dinner out with the family. But nevertheless, we need some insurance because it protects us.
And, while insurance is a vital part of financial protection, many of us spend money on coverage we don't need. Identifying such unnecessary coverages—while learning how to maintain a safe level of protection—will put money back in your pocket. And a little extra cash is something we all enjoy.
Private Mortgage Insurance (PMI)
According to experts, one-quarter of all homebuyer's are hit with PMI.
When you buy a home, the mortgage company wants to make sure you don't leave them high and dry. Consequently, if you put down less than 20 percent of the home's value, chances are you'll have to purchase PMI.
For the most part, PMI is used to secure the lender's investment. However, it is also used to entice consumers to purchase homes with less money down—something you might pay for in the long run: premiums for PMI can amount to as much as a 13th mortgage payment.
Of course, once the balance on your mortgage falls below 80 percent, your lender is required to notify you of such so you can cancel your PMI.
Instead, try saving more money to put toward the purchase of your home. Or, if that's not an option, try one of the following:
- Consider a "piggyback" loan. Stick 80 percent of the home's purchase price on a traditional mortgage and the remaining on a second mortgage. While you may receive a slightly higher interest rate on the second mortgage, you will save money because your entire loan will be tax-deductible. Plus, if you pay off the second mortgage early, you will drastically lower your premiums.
- Consider a No-PMI loan. In this case, the mortgage company picks up your PMI tab in exchange for a slightly higher interest rate on your loan.
Deciding which option is best for you will depend on your financial situation. But the bottom line is this: avoiding PMI will put extra cash back in your pocket.
Life Insurance for Kids
Parents buy this coverage for their kids to be prepared for the unthinkable—to pay for funeral and burial costs And while we hate to think of something happening to our kids, , this coverage doesn't sound like a bad idea.
But before you jump on the juvenile insurance bandwagon, remember one of the cardinal rules of life insurance: life insurance is for people that have dependants and debts. Typically, children don't have either.
The real solution here is to increase your life insurance coverage. There's a far greater chance of something happening to a head of household than a child.
So skip on the life insurance for your little tyke. Pump up your own life insurance instead—and put the rest into a college savings account for Junior.
There isn’t actually a product called cancer insurance; when used, it refers refers to a type of health insurance that covers a person if they develop some kinds of cancer. And with cancer ties to everything from deodorant to microwave popcorn, the cancer epidemic has most people seeking every type of preventative measure. For $400 a year, cancer insurance might not seem like a bad investment.
The kicker with cancer insurance involves the actual coverage it offers. Many companies won't pay for cancer treatments until you've had the policy for several years. Even then, some cancers may be excluded, such as skin cancer, which cancer insurance rarely covers.
Make sure you have adequate health insurance, and you should be protected if you or a loved one gets diagnosed with cancer or other life-threatening illnesses.
Following the terrorist attacks on 9/11, the concept of flight insurance took off…so to speak.
There isn’t a product called flight insurance; it is a type of accidental death and dismemberment coverage which covers you and you family from the time you board a certified aircraft until the time you exit.
Generally low cost, this coverage offers 100 percent paid benefits for loss of life, loss of both limbs, loss of sight in both eyes and loss of one limb and sight from one eye; 50 percent benefits are available for less serious injuries.
Appealing? Maybe. Worth it? Not in a million years.
According to some reports, you could fly on a major airline every day for 26,000 years before you'd be involved in a crash. Even then, you'd probably survive.
If statistics don't ease your mind, make sure to check the provisions included with the purchase of your plane ticket. Chances are, if you paid for your ticket by credit card, you're already covered for up to $100,000. So save yourself the cash on flight insurance—pick up a souvenir from your trip instead!
Wedding insurance covers a variety of potential mishaps on your big day: no-show ministers and photographers, adverse weather conditions, loss of deposits, jewelry and attire—even mandatory military leave for the bride and groom.
In reality, the likelihood of these catastrophes is very small. You can avoid certain mishaps by working only with reputable vendors and getting a list of their refund policies beforehand.
Taking precautions and skipping the wedding insurance will save you time and money—leaving a few extra hundred dollars for the honeymoon.
With Americans spending over 10 billion dollars a year at the vet, the popularity of pet insurance is on the rise.
Believe it or not, more and more companies are offering pet insurance in their benefits package. Participants can dole out anywhere from $10 to $30 a paycheck for a plan that pays for up to 80 percent of veterinarian costs.
While this plan appeals to many pet owners, it typically doesn't pay off. With the average checkup running dog and cat owners around $150, paying over $700 a year (at $30 per paycheck) for pet insurance is anything but a bargain.
Instead, keep Fluffy and Fido loved, fed and exercised—and modify your budget to handle additional pet expenses.
At InsureMe, we constantly strive to help consumers find the right insurance and make informed decisions about their coverage. And, while we often stress that good coverage can actually you save money in the wake of disaster, it doesn't mean you need to insure everything.
Instead, concentrate on purchasing policies to protect you and your family from devastating risks, involving your home, health, life and automobiles. Buying what you need, when you need it is the best line of defense you can take.
The aforementioned types of insurance are not available in all 50 states or, in some cases, are referred to by another name. Check with your department of insurance to find out what kinds of insurance are available in your state.