Investopedia has a large repository of articles describing various issues regarding finance. The articles are informative, though imperfect. It is still a good place to start your research.
Their article on 15 Insurance Policies You Don't Need highlights insurance policies that should be purchased with caution. I cannot endorse the idea that any insurance policy does not have a niche use. Insurance is a highly regulated industry and the Commissioner of Insurance must approve any product for sale. Each policy has its uses and it is best to discuss your individual situation with a trained professional who is knowledgeable about your needs and can provide appropriate solutions.
1. Private Mortgage Insurance
Private mortgage insurance is an example of insurance you may be required to buy, but has little benefit to you. Sometimes, others require you to buy insurance because they want it. This is usually a case when the underwriting process acts as a screening mechanism for the beneficiary. In this case, the bank that owns your mortgage is allowing the insurance carrier to evaluate how likely you are to default in the covered situations and set a price for that. Always ask yourself if you benefit from a policy before you choose to buy it.
2. Extended Warranties
Extended warranties are often bad proposition for you because of the size of the policy. It may be worthwhile to get the policy on a large purchase. The rule of thumb that helps weed out these types of policies is to remember that insurance is meant for catastrophic losses. If the loss does not qualify as a catastrophe in your life, you are unlikely to need coverage.
3. Automobile Collision
I would not include automobile collision insurance on a list of products you don't need. Like any policy, there are many situations when you should not buy it. It is bought unnecessarily on a regular basis. A good broker will help you evaluate your need honestly instead of trying to sell you whatever you may be willing to buy.
4. Rental Car Insurance & 5. Car Rental Damage Insurance
This is an example of overlapping coverage, as opposed to unneeded coverage. The reason you should be wary of buying this type of insurance is that it is most often already in place without your knowledge. A good insurance broker will know your policies well enough to eliminate wasting your money on buying the same insurance twice.
6. Flight Insurance
This would be an example of overlapping coverage, if everyone had the insurance they need. Unfortunately, this is too often not the case. Buying coverage in this manner tends to be more expensive and leave important gaps. If you don't have life insurance, you probably should buy that instead. Investopedia includes life insurance in its list of 5 Insurance Policies Everyone Should Have.
7. Water Line Coverage
This is a mix of many different types of situations you should try to avoid. The policy is too specific, the loss is unlikely to be catastrophic and you are likely to be covered already. Get good homeowner's insurance. It will be cheaper, better and easier to manage.
8. Life Insurance for Children
This is one of the few policies that I think simply should not exist in its current form. It fits the unfortunate category of products that are in high demand solely because people want to do everything they possibly can for their children. There are extremely limited situations where a policy like this is advisable. If you are in such a situation, your broker should alert you to the need.
9. Flood Insurance
I strongly disagree with including flood insurance in a list of insurance products you don't need. I include it in my list of policies everyone should consider. Flood insurance is run through the Federal Emergency Management Agency because insurance carriers are unable to make it profitable. Like any insurance situation, certain people have no risk and should not buy it. You can use this website to help you evaluate your situation.
10. Credit Card Insurance & 11. Credit Card Loss Insurance
This is an example of insuring yourself against a perceived risk that may not exist. A good broker will be knowledgeable about what risks you do and do not have. Use your broker as a resource to assess your risks to avoid buying coverage for phantom risks.
12. Mortgage Life Insurance
This is very similar to flight insurance. Make sure you have the life insurance policy you need instead of buying it in patches.
13. Unemployment Insurance
I am a bit surprised the list includes an insurance policy that doesn't exist. Government unemployment benefits are not voluntary and I am not aware of any carrier who sells it privately in California.
14. Disease Insurance
The author misunderstands the need for this type of coverage and what a good policy covers. If you are at an elevated risk, adverse selection can be your friend. Your broker should be aware of good policies that are available and may be more favorable to you than the general population. I buy Aflac's cancer policies for my clients who know they have been exposed to more carcinogens or have a higher genetic disposition than the average person.
15. Accidental Death Insurance
Yet another reason you should have a good life insurance policy!
For individualized help with your insurance needs, please contact me directly.
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