3 Types of Insurance Policies That You Don't Need

Insurance Can be Extremely Important, But It Can Also Be Unnecessary

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There are undoubtedly some types of insurance that everyone absolutely should have, but insurance is big business and there are constantly new products and policies being created to fit all sorts of needs. Some are clearly not applicable to you, but others might sound like a good idea. So short of working with a fee-based financial planner, how do you determine what insurance you and your family needs?

I recommend starting with the types of insurance policies you need and making sure that you can check off the list with the policies you currently have in place. Once those policies are in place, you can start to consider other insurance types that might be important to your unique situation (like key man insurance for business owners or long-term care policies to offset the rising costs elderly care).

Insurance Policies That You Don't Need

While there are certainly more than a few types of insurance policies that have their place in people's portfolios, there are just as many that you are probably better off without. Some of these policies may sound like a good idea, but in reality all you are doing is likely wasting money on the premiums. The following insurance types are those that most people simply don't need.

1. Mortgage Life Insurance

This type of insurance is receiving more media coverage lately, but it is probably a policy you can do without.

Mortgage Life Insurance is a policy that promises to pay your mortgage payment in the event you become disabled or die. If you are married this sounds like a pretty good idea, right?

Well, not exactly. This type of policy really only overlaps with your existing insurance policies that you hopefully you already have through your employer or through a separate policy (remember the list of insurance everyone should have?).

Considering the in event of death, with a standard life insurance policy, the beneficiary of the policy receives the benefit that can be used for any expense they choose including paying off your shared mortgage. It is typical for financial planners to recommend that a life insurance policy be taken out for an amount that not only covers the lost income of the deceased, but some additional amount to cover other costs. In the case of disability, you would be better off considering a disability insurance policy, that similar to life insurance, the benefit from which can be used for more than just your mortgage.

In the end, why pay an additional premium for something that a cost-effective life insurance policy can pay for?

What it comes down to is that this type of policy is very narrow in its coverage and, therefore, is probably not the best use of insurance premiums. You are generally far better to stick with a good life insurance policy. You can always increase your life insurance coverage to offset your mortgage balance if that is something you are especially concerned about.

2. Travel and Flight Insurance

Travel and flight insurance policies offer another type of coverage that may just require you to pay a premium for insurance that may overlap with coverage or benefits you already have.

First, check your current health and life policies to see how incidents resulting during travel or flights are covered. More than likely there is some sort of coverage included. And in the event of some catastrophe, your life insurance policy should provide coverage in the event of your death.

If you use a card to book tickets or travel arrangements, you will also want to check with your credit card company. Many credit card companies automatically provide some basic coverage when they are used to purchase travel tickets. If after checking these alternative routes you find that you still need some additional coverage to keep your mind at peace, you can always purchase additional insurance to cover only what you need that is above and beyond what you already have.

3. Cancer Insurance/Disease Insurance

Disease insurance like cancer insurance is becoming very popular recently with a rise in cancer rates and overall awareness.

But is it really a good idea? While cancer treatment can come with some astronomical medical bills, you might want to hold off on taking out a cancer-specific insurance policy. The reason cancer and disease insurance is generally such a poor insurance choice is that in most cases, your primary health insurance policy covers medical expenses related to cancer treatment. If you are worried about the cost of potentially expensive treatments, like cancer treatment, you should start by checking what your current coverage looks like.

Beyond the likely overlap in coverage, the most shocking reason cancer insurance policies can become a waste of money is that most cancer insurance doesn’t even cover skin cancer, the leading type of cancer. Not only that, but cancer insurance typically doesn’t even cover outpatient expenses related to the cancer treatment. So what are you paying for?

Unless your health insurance specifically does not cover cancer-related expenses or you have a high likelihood of getting a specific type of cancer that could be covered by a policy, you are more than likely wasting money on a premium you could be using elsewhere.