What type of insurance you should avoid?

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What type of insurance you should avoid? 

Insurance to Avoid

Insurance helps you manage risk by passing some of it along to a third party — the insurance company — in exchange for the payment of a premium.

Here are 3 primary reasons to be insured:

1.     Things happen. Accidents, illnesses, injuries, thefts and natural disasters happen all the time. Any of these events quickly can drain your savings and put you into debt. 

2.     Another reason to have insurance if The law says so. Almost all states require drivers to carry auto liability insurance. The same goes for health insurance (the Affordable Care Act is still the law at the time I am recording this video)

3.     Lenders say so. Your car or home can be seized by a lender if you default on your loan. Lenders don’t want to lose their investment, so they insist on certain levels of coverage. 

Now, let’s take a step back for a moment and talk about situations where insurance is not worth the purchase or is unnecessary.

Ask yourself these questions before buying add-on insurance:

1.     Do I really need this insurance?

2.     If I do need it, do I already have this coverage in an existing insurance product such as home, health, life or auto insurance?

3.     Are there other less costly ways to get this coverage?

There are at least 4 types of insurance that you probably want to avoid or look into with more detail before purchasing.

- Credit insurance or debt cancellation insurance – This pays off your debt in case of death, illness, injury or loss of job.

You may not need this if you have adequate life or other insurance to pay off debts. Typically these policies pay less than 50% of the premium you pay in because of kickbacks paid to the seller. 

- Title insurance – This guarantees the title to a home is free from any other ownership claims. 

This type of insurance is important for the buyer, in particular, but be careful before accepting any title insurance company offered by a real estate agent, company or lender. It’s important to shop around before purchasing title insurance. 

- Travel insurance – This covers your costs in case your travel plans are interrupted.

You may not need this if you have coverage through life insurance (in case of death) or homeowners insurance (lost luggage). You might consider medical travel insurance though if your health plan does not cover international travel.

- Rental car insurance – These policies cover you if you have a collision in a rental car.

Most car insurance plans already cover you when you rent a car. Also, using your credit card to rent a car may carry coverage. Check your car insurance policy and credit card before agreeing to purchase this insurance.

Perhaps there are other situations where the risk  could be managed without the use of insurance. In case I’ve missed something, please feel free to add it or comment!

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