Do You Need All of These Insurance Policies?

The following is a guest post from Crystal at Budgeting in the Fun Stuff. Her blog aims to cover paying for your necessities, saving for your future, and all the fun stuff in between.

 

This post at Yahoo Finance listed 15 Insurance Policies You Don’t Need.  The following is their list of policies, a quick summary of their explanations, and my personal point of view:

1.  Private Mortgage Insurance:  Increase your home equity to at least 20% so you don’t have to have this policy.

I am a big believer of buying a home you can afford and putting at least 20% down, but if you didn’t, you will need this policy.  No choice is no choice…

2.  Extended Warranties:  Unless you are purchasing a big, expensive electronic, don’t worry about this.

I personally never buy extended warranties but there are tons of people who swear by them.  Check out your credit card benefits since many have extended warranty policies for electronics in some shape if you use the card for the purchase.  For example, our Discover More card will double the extended warranty of an electronic up to one additional year.

3.  Automobile Collision – If you are driving an old, paid off car, you should cancel this part of your auto insurance policy.

I don’t carry a collision policy on my car, but that is slightly stressful to think about.  My car is only worth about $4000, so I figure that I have a good shot of being fine until it’s time for me to move on to something better.  So far, so good and I’m keeping my fingers crossed.

4.  Rental Car Insurance – You’ll spend more than you’ll probably ever use.

Yes, but it is nice to have when you need it.  My husband had the rental policy on his insurance when he got into 2 different major accidents in college, so we’ve already made our money back even if we never use it again.  He has this policy and I don’t. Our Geico plan doesn’t allow rental car coverage unless you have collision coverage as well.

5.  Car Rental Damage Insurance – Many auto insurance policies already cover this.

Remember to check your credit card benefits too.  According to our Discover Card “Your Discover Card comes with a Car Rental Insurance Plan that provides $25,000 of secondary collision damage insurance when you rent a car using your Discover Card and decline coverage offered by the rental agency.”  Woot!

6.  Flight Insurance – This is completely unnecessary.

I’d have to agree.  Have any of you ever bought this?

7.  Water Line Coverage – You’ll probably never need it.

I didn’t even know this existed.  I’m choosing to continue to bask in my ignorance.

8.  Life Insurance for Children – Statistically, most kids don’t die.  They also don’t leave heirs.  Put the money towards an educational fund or IRA instead.

I agree that kids don’t have heirs and it’s probably unnecessary, but I would increase my emergency fund to include enough for horrendous expenses. If any of you carry insurance policies on your children, could you help fill in my blanks? Why did you choose to get this policy?

9.  Flood Insurance – Unless you live in a flood plain or a place that has a history of water problems, you won’t need this.

Well, I live right outside of Houston, TX, so I need this policy.  Thankfully, we haven’t needed it yet, but 2 of our friends have…

10.  Credit Card Insurance – Don’t carry credit card debt, and you won’t need this policy.

I agree.  No credit card debt, no need for credit card insurance.

11.  Credit Card Loss Insurance – Since your loss is limited to $50 or less, this is unnecessary.

This is also true.  My credit card was left (read- I totally forgot about it at the register) at an out-of-state restaurant before and it took one 3 minute phone conversation to have it marked as lost and 3 days to get the new card in the mail.

12.  Mortgage Life Insurance – Since a life insurance policy could be used to pay off your house and for other bills too, it would be a better idea.

I agree 100%.  Why have a billion specific policies rather than one cover-all?

13.  Unemployment Insurance – An emergency fund would make this unnecessary.

Well, I partially agree.  An emergency fund will cover you during unemployment, but you will be using your money instead of an insurance company’s money.  My husband and I have stable enough jobs to feel secure with a solid emergency fund, but if we worked in a volatile field, I would look into this.

14.  Disease Insurance – Good medical insurance will cover whatever ails you, so you don’t have to get a policy for each specific disease.

I hadn’t even heard of these policies either.  My medical insurance covers all ailments, so I feel secure.

15.  Accidental-Death Insurance – These policies are often fraught with stipulations that make them useless anyway.

Yes, these policies usually have a ton of if’s, and’s, or but’s.  I wouldn’t usually buy one, but my job supplies me with a small accidental death policy anyway.

Did you see any policies on the list that you’d feel uncomfortable by skipping?

Comments

  1. says

    Geez! I didn’t even know a lot of these types of insurance existed! Wild! I agree with you all. Private Mortgage Insurance, a lot of times, isn’t an optional item to have.

    One thing that I have pondered over is whether or not people should buy a house if they have less than 20% of the cash for a downpayment. I am leaning towards “yes” due to the tax deductions and other benefits you have from home ownership.

    What’s you all’s take on this?

    Jacob

  2. Holly says

    Yes, I do have riders (which cost next to nothing!) on my own 20-year term life insurance policy to cover each child for $15,000 (we have 3) in the event of their death. The policy is w/USAA. I know it is worth it since my children will automatically be insurable regardless of any chronic illness or disease they might suffer from in the future.

    I have my mother as a secondary beneficiary of the kids’ and my L.I. benefits since she is legally designated to care for the kids should my husband and I die at the same time.

  3. says

    I have term life insurance for myself and a whole policy for my son. I chose to buy him one because the agent told me that I can sign it over to him when he becomes an adult, and its cash value will be worth $400 000. I should really check the policy again to see if this is accurate.

  4. says

    I have Accidental Death and Dismemberment through work. It was incredibly cheap to ad 1.5 my salary to my coverage. I’m in sales and am in my car a lot, so my chance of dying from a car accident is higher than average. Unfortunately, a colleague of mine got to take advantage of this when he was in a head on collision last year.

  5. says

    My Personal Finance Journey, I’d say that it wouldn’t be silly to buy a house with less than 20% down if it still would be less debt than 20% of your take home pay. I don’t really think of the PMI too much, but it’s always better to have manageable, affordable debt so that you have some space to breath even during rough financial times.

    Of course, because I do believe keeping a mortgage affordable, that sometimes means that there is no benefit. For example, we’ve never been able to get tax benefits from our house since the standard deduction is twice as much as the interest of our house ever was in one year.

  6. says

    I finally took the plunge and canceled collision on my car, although I’m still nervous about doing so. Which is silly, since even if I left it in place and got in an accident, my car is worth so little according to KBB that I’d probably literally get nothing after the deductible.

    So now the only one on the list that I have is flood insurance, which I am definitely keeping despite not being in a flood plain. It’s very cheap, and I’ve seen too much flooding in the area over the years to feel comfortable without it.

    • Squirrelers says

      Jackie – I know what you mean about flood insurance. Here in the Chicago area, there have been some torrential rains multiple times this summer. Just this past weekend, there was flooding in the area. I saw a quote by someone in a local suburb where a lady said she lived in her town for 29 years and never saw anything like it at all. Clearly, the unexpected can happen.

  7. says

    Jackie, hopefully you won’t ever be in an accident and will feel super smart for cancelling collision…I’m probably being stupid since my car is still worth $4000, but so far, so good.

    I also agree that I’d get flood insurance whether I lived on a flood plain or not…it’s just too risky not to if you live anywhere that coul possibly have problems.

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