Because we can’t predict the future, we want to be ready to cover our financial needs if, or when, something bad happens. Insurance companies understand this fear and offer a variety of insurance policies designed to protect us from a host of calamities that range from disability to disease to everything in between.
While none of us wants anything bad to happen, many of the potential catastrophes that happen in our lives are not worth insuring against. In this article, we’ll take you through 15 policies that you’re probably better off without.
Rental Car Insurance
Most auto insurance policies offer additional coverage for the cost of car rentals, touting it as useful if your car is involved in an accident. This may sound good, but most people rarely rent a car, and when they do, the cost is relatively low and hardly worth insuring against.
Although rental car insurance is relatively inexpensive, amortized over the course of a lifetime you are still likely to spend more than you will benefit.
Private Mortgage Insurance
The infamous private mortgage insurance (PMI) is well-known to homeowners because it increases the cost of their monthly mortgage payments. PMI protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance but derives no benefit.
PMI is required if you purchase a home with a down payment of less than 20% of the home’s value. The small down payment is viewed as putting you at risk of defaulting on the loan. Put down at least 20% and there’s no PMI. Alternatively, you can put down 10% and take out two loans, one for 80% of the sale price of the property and one for 10%, although interests rates can prevent the economics of this manoeuvre from benefiting the homeowner.
Automobile Collision Insurance
Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan out on the car, the loan issuer is likely to require that you have collision insurance, but if your car is paid off, collision is optional.
Therefore, if you have enough money in the bank to cover the cost of a new car, collision insurance may be unnecessary. This is particularly true if you are driving an old car, because cars depreciate so quickly that many vehicles are worth only a fraction of their purchase price by the time the loan is paid in full.
Policies are available to cover cancer, heart disease, and other maladies. Instead of trying to identify every possible disease you may encounter, get a good medical coverage policy instead. This way, your medical bills will be covered regardless of the problem you face.
Life Insurance for Children
Life insurance is designed to provide a safety net for your heirs/dependents. Because children don’t have heirs and, statistically speaking, are likely to grow up safe and healthy, most parents should not purchase life insurance for their kids. Instead, use the money that you would have spent on life insurance to fund an education plan.
While a certain amount of insurance coverage is necessary, you need to choose carefully. In general, broad policies that offer coverage for a multitude of potential events are a better choice than limited-scope policies that focus on specific diseases or potential incidents. Before you buy any policy, read it carefully to make sure you understand the terms, coverage, and costs. Don’t sign until you are comfortable with the coverage and are sure you need it.