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Unnecessary Insurance

January 28th, 2012 · blog, Guest Post

A person who is vigilant with his or her finances often considers a variety of different kinds of insurance policies that can protect one in the event of a disaster, fraud, or changes in life’s plans. Insurance can be a critical component in credit building, healthcare, and home ownership. For example, if you’re selling your home and a real estate vendor tells prospective homeowners ‘we buy houses,’ details of your insurance policy are included right there in the mix with utilities and repairs. So the question becomes what kinds of insurance do you need and what kinds do you not need? Necessary insurance includes health care, car, home and other staples. Unnecessary insurance policies can be a little trickier. Here’s a guide to help you identify them to avoid wasting money:

Credit Card Balance Insurance
This coverage, offered by most major credit card companies, ostensibly covers your minimum monthly credit card payments in the event that you become ill or unemployed. Sounds pretty fair until you realize you’re paying extra money each month in the anticipation of not being able to spend extra money each month. It doesn’t really make sense.

Flight Life Insurance
This plan covers you if you’re injured or killed in a plane crash. Makes sense if you fly a lot, except for the fact that you probably already have this covered by either your health insurance or life insurance plans.

Mortgage Life Insurance
Don’t get this confused with the more practical ‘mortgage insurance’. ‘Mortgage life’ takes on the considerably more ambitious—and unnecessary—task of paying your mortgage for you if you die. Again, this is an example of an insurance plan that is most likely redundant. Most term life insurance plans, which are cheaper, will handle mortgage payments.

Credit Life Insurance
This one’s fundamentally the same as mortgage life insurance except that the plan covers your credit card balance (not your mortgage) in the event of your untimely passing. Once again, this financial obligation should already be covered if you have term life.

Credit Protection Insurance
This form of insurance takes on the specter of fraud and identity theft, promising to protect your finances if someone hacks into your accounts or steals your debt or credit cards. Sounds prudent, but it’s actually completely unnecessary. Identity theft losses are already covered by federal law and credit bureaus. Credit protection insurance is predatory and takes advantage of people’s fears.

The basic lesson here is to look into your existing insurance policies before you sign on to new ones. Term life insurance, health insurance, and other basic plans will often cover you in the event of most scenarios and for less money.


1 response so far ↓

  • 1 // Jul 9, 2012 at 3:40 am

    Agreed. These types of life insurance are available, but are so rarely used that it would make a lot more sense to just pay the premiums for a traditional term life insurance policy than to buy a policy that is so narrow in scope.

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