It’s true that some insurance policies are needed to protect your assets. Purchasing insurance to protect your home or your car, and insurance that can help you afford the cost of health care or protect your family’s income if you should die, are financial necessities. It might even be worth it to buy disability insurance, depending your situation, and your work.
However, while some insurance policies are necessary, others are practically useless. Some policies cover items that are already covered by other insurance, or cover problems that can be avoided with some good financial planning. Here are 5 insurance policies that you probably don’t need to buy:
1. Flight Insurance
This is insurance designed to pay out if you should die while flying in an airplane. Not only is the risk of death quite low for an airline flight, but if you have life insurance, you are already covered. There is no reason to purchase this insurance. Ever. Just make sure that your life insurance coverage is adequate for your needs, and you should be set.
2. Car Rental Insurance
First of all, check to see if your auto insurance policy automatically covers this. Even if it does, it might be a better idea to drop the coverage, since car rentals usually aren’t that expensive. What is necessary might be car rental damage insurance. However, you probably don’t even need to pay extra for that. Your regular auto policy might cover it already. Plus, many credit cards offer this coverage as a perk. As long as you rent the car with the credit card, you should be covered. No need to purchase coverage from the rental car company.
3. Child Life Insurance
The point of this insurance is to provide you with a payout should your child die early on. However, child life insurance isn’t all that helpful since most children don’t have dependents or heirs to worry about. And, even though some child life insurance policies come with a cash benefit for the child when he or she is older (turn in the policy for money that can be used for schooling), you might be better off to just set money aside in an IRA, 529 or Coverdell. The money is likely to grow faster in one of those accounts than build cash value as insurance.
4. Mortgage Life Insurance
Like flight insurance, this is completely unnecessary. Mortgage life insurance is designed to pay off your home mortgage if you die. However, if you plan your life insurance coverage right, the payout should be sufficient for your family to pay off the mortgage. There is no reason to spend money on this type of insurance policy, which, of course, covers less over time as your mortgage shrinks in size.
5. Credit Card Insurance
Any kind of credit card insurance is probably useless. Credit card loss insurance isn’t very helpful; you’re already limited, by federal law, to $50 liability of you lose your credit card and it’s used fraudulently. Credit card bill insurance is also unnecessary if you have planned ahead. Pay off your credit card each month, and build up an emergency fund, and you won’t need to worry about whether or not you can make credit card payments if you experience a financial setback.
