Insurance You Probably Don’t Need
BOSTON (CBS) – And every time we chat about frivolous insurance I will hear from at least one listener who used their pet insurance or auto loan insurance and begs to differ with me. It does happen, but not often enough for me to make broad sweeping recommendations.
Insurance is a financial tool that is used when you don’t have enough dollars in your emergency fund to cover the loss yourself. Buying insurance is an emotional transaction. You are asking the insurance company to cover the terrible things in life that could happen to you. So it is no surprise that insurance companies have insurance for all sorts of perils. There are some policies that may not be worth purchasing.
Credit Card Loss Protection: We all fear our credit cards or credit card numbers will be stolen because we hear so much about identity theft. But you don’t need that $200 plus a year policy to protect you. Federal law limits your losses to $50 per card. Best advice: forget it and check your free credit history to catch any problems.
Also being sold are policies to cover the balance on the credit card if you should die, become disabled, or lose your job. The beneficiary is the credit card company. Best advice: you are far better off owning life insurance and disability insurance.
Cancer Insurance: You don’t need a policy that only covers one disease. Cancer is a much feared occurrence and insurance companies are playing on your fears. Best advice: good health insurance, disability insurance and life insurance is what you need to cover any illness that may occur.
Flight Insurance: Odds of being killed in a plane crash are 1 in 11 million. Best advice: buy life insurance to cover the loss of life anywhere. If you have purchased your tickets with a major credit card you may already have flight insurance coverage.
Mortgage Or Auto Loan Insurance: These policies are often sold by the mortgage company or bank to insure the loan if something should happen to you. If you die the mortgage or the car is paid off. That is good, but there are better ways to provide the same coverage. Best advice: buy life insurance. It’s cheaper and offers broader coverage.
Pet Health Care Insurance: Pets are like people’s kids so when ever you talk about pets you offend someone. But I have not seen a really good policy out there. And I am not sure this is a practical purchase. Average cost about $650 a year. Average expenses for a dog at the vet’s for a year is $211, and for cats $179 according to the APPMA, American Pet Products Manufacturers Association.
What I do know is that pet health care has become more expensive as vets are applying more people medicine to animals. There are now chiropractors as well as acupuncturists for animals. And most policies have a deductible of $100 and an annual cap of $2,000. Best advice: to care for your beloved pet be sure you have an adequate emergency fund tucked aside.
Life Insurance For Children: I will hear about this one! You don’t need life insurance for the kids! I know Gerber sells it and who can you trust if you can’t trust Gerber. You can buy $10,000 of life insurance for just over $47 a month.
And despite what the salesperson says; these policies are not good ways to save for the kiddo’s college education. Best advice: use the state’s 529 plan provided by Fidelity as a better choice for college savings.