Friday July 18, 2008 - Insurance: Some You Probably Don't Need
Insurance is a financial tool that is used when you don’t have enough dollars in your emergency fund, that 911 fund, to cover the loss yourself. Someone like Donald Trump or Bill Gates have lots of money to self-insure but the average person does not.
Buying insurance is an emotional transaction. You are asking the insurance company to cover the terrible things in life that could happen to you. So it is no surprise that insurance companies have insurance for all sorts of perils. The following are some policies I don’t think are worth purchasing.
Life Insurance for Children: I will hear about this one! You don't need life insurance for the kids! I know Gerber sells it and who can you trust if you can’t trust Gerber. You can buy $5,000 of life insurance for just over $3 a month.
And despite what the salesman says; these policies are not good ways to save for the kiddo’s college education. Best advice: Use the state’s 529 plan provided by Fidelity as a better choice for college savings.
Pet Health Care Insurance: This is a tricky one. Pets are like people’s kids so when ever you talk about pets you offend someone. But I have not seen a really good policy out there. And I am not sure this is a practical purchase. Average cost about $450 a year. Average expenses for a dog at the vet’s for a year is $211, and for cats $179 according to the APPMA, American Pet Products Manufacturers Association.
What I do know is that pet health care has become more expensive as vets are applying more of the people medicine to animals. There are now chiropractors as well as acupuncturists for animals, neither of which are covered by pet health insurance. And most policies have a deductible of $50 and an annual cap of $2,000. Best advice: To care for your beloved pet be sure you have an adequate emergency fund tucked aside
Credit Card Loss Protection: we all fear our credit cards or credit card numbers will be stolen because we hear so much about identity theft. But you don’t need that $200 plus a year policy to protect you. Federal law limits your losses to $50 per card. Best advice: forget it and check your credit history often to catch any problems. To check for your free credit report: www.annualcreditreport.com
Cancer Insurance: You don’t need a policy that only covers one disease. Cancer is a much feared occurrence and insurance companies are playing on your fears. Best advice: good health insurance, disability insurance and life insurance is what you need to cover any illness that may occur.
Flight Insurance: I fly a lot and the odds of an accident are very remote. Best advice: Again buy life insurance to cover the loss of life anywhere. If you have purchased your tickets with a major credit card you may already have flight insurance coverage.
Mortgage or Auto Loan Insurance: These policies are often sold by the mortgage company or bank to insure the loan if something should happen to you. If you die the mortgage or the car gets paid off. That is good, but there are better ways to provide the same coverage. Best Advice: Buy life insurance. It’s cheaper and offers broader coverage.
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