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 and provide insurance policies to protect us from unforeseen calamities. These could range from diseases to disabilities and everything in between.
While we always hope for luck to be on our side, potential catastrophes in our lives are not worth insuring. In this writeup, we’ll look at 5 policies you don’t need.
What are the 5 insurance policies you do not need in Nigeria?
Some of the insurance policies you do not need include:
1. Rental Car Insurance
Most auto insurance policies provide extra cover for car rental costs. They make you believe it is useful, should your car get in an accident. The truth is, most people hardly rent a car. When they do rent one, the cost is relatively low and scarcely worth insuring.
Although rental car insurance is not expensive, chances are you won’t need it in your lifetime. Meaning you’d be spending more than benefitting from it.
2. Private Mortgage Insurance Policy
Private mortgage insurance (PMI) is A familiar cover to homeowners. It increases their monthly mortgage cost. What PMI does is to protect the lender against loss when lending. Borrowers pay for this insurance with no benefits along.
You require PMI if you purchase a home with a down payment of less than 20% of the home’s value. The down payment signifies you’re at risk of defaulting on the loan. If Put down a minimum of 20%, there will be no PMI. You can also decide to do 10% and take two loans out. One will be 80% of the price of selling the property. The other will be 10%. Do note; interests rates may prevent the homeowner from actually benefitting.
3. Automobile Collision Insurance Policy
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 you pay back the loan. Read more on car insurance rates in Nigeria.
4. Disease Insurance Policy
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 part of the cover regardless of the problem you face.
5. Life Insurance Policies 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.
Read more on the history of insurance in Nigeria.
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.
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