7 Insurance Policies Experts Say You Can Do Without
Written by
Martin Dasko
Edited by
Ashleigh Ray
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
When it comes to protecting your most valuable assets, insurance can be a great safety net — though it can also come with a hefty price tag.
Knowing that you’re covered in the case of an emergency can be well worth the expense, but you shouldn’t feel the need to purchase every insurance policy that comes your way.
While some policies are essential, there are certain ones you can turn down, knowing your wallet will thank you in the long run. Here are seven insurance policies experts say you can skip.
Extended Warranties
When you purchase an electronic or other gadget, you’ll likely be offered an insurance package. While it may seem like the right move at the moment, you don’t always need to purchase this coverage, as it doesn’t always provide what you may be expecting.
Many products already come with a decent warranty period from the manufacturer, and the total cost of the extended warranty may be more than the cost of a repair. You could also have additional credit card purchase protection that would make the policy redundant.
To make matters worse, specific maintenance requests could be required from the company to fulfill your warranty. According to the FTC, a difficult claims process or waiting for reimbursement could also reduce the value of coverage.
Term Life Insurance for Children
Imrana Begg, an executive director at Experior Financial Group US, warned against purchasing term life insurance for children since they don’t have dependents.
She said, “since children typically have many years ahead of them and are generally healthy, a cash value-building account with no term limit would be the better choice.”
A life insurance policy for your kids is also not the ideal saving or wealth-building tool, as there are better options available. You may be better off with a high-yield savings account or other tool that will provide higher returns and easier access to the funds.
Pet Insurance
If your pet is healthy or if you have enough saved to cover vet bills, you may be able to avoid this type of insurance. While some experts will recommend spending the money on this policy, you can also choose to put that money in a separate savings account, similar to an emergency fund.
Thanks!
It’s also worth pointing out that with different insurance policies, there are different restrictions and prices for specific breeds and medical conditions.
Private Mortgage Insurance
Private mortgage insurance is required if you take out a conventional loan and your downpayment is less than 20% of the purchase price. This type of insurance protects the lender and doesn’t offer you any protection. It just increases your expenses as a new homeowner.
Luckily, there’s a way to avoid taking out private mortgage insurance — put down a larger downpayment. As tempting as it may be to enter the housing market right away, it’s a better idea to wait a little bit longer and save up the money.
Mortgage Protection Insurance
Mortgage Protection Insurance is the right policy for homeowners who want to protect their largest asset and provide financial security for their families. This type of policy would pay off your home mortgage if you pass away. However, this coverage has a restricted payout and will add another expense to your budget.
“This policy can be a good fit if the goal of the purchaser is to pay off their house if they pass away during the policy coverage period,” said Begg. “Usually, both spouses purchase mortgage protection insurance separately to ensure the home’s mortgage in the case of either parent’s death.”
Begg noted that a term life insurance policy may be a better option since this policy is cheaper than MPI and provides money to the beneficiary to use as they see fit.
Credit Card Balance Protection Insurance
Credit card balance protection insurance is a policy that kicks in when you’re unable to pay your balance due to an unforeseen event. This policy would pay off your balance in the case of an emergency, but your goal should be to avoid carrying a balance in the first place.
“Credit card insurance or balance protection is marketed as a safety net to cover your minimum payments in case of a sudden loss of income due to health or employment issues,” explained Erika Kullberg, attorney, personal finance expert and founder of Erika.com.
“However, the actual coverage you’ll have is often quite limited in scope, which coupled with high premiums, makes it a fairly bad deal in most cases.”
This type of insurance isn’t as helpful as it seems, and the high premiums could just lead to additional financial issues.
Kullberg added, “you’d be much better off putting that money toward building a rainy-day fund or increasing the value of your investments.”
Travel/Flight Insurance
If you’re going on a short-term domestic trip and/or already have coverage through your credit card, you probably don’t need to purchase additional protection for your flight.
And if anything tragic were to happen aboard the flight and you were to die accidentally, this policy would be redundant since the airline would likely pay out your family regardless of your coverage.
More From GOBankingRates
