Some kinds of insurance are necessary. The following, however, may not only be unnecessary but downright ridiculous.
ACCIDENTAL DEATH INSURANCE. Why pay extra for this kind of insurance? Statistically, it is highly unlikely you will die in an accident and even if you do the basic life insurance you carry should be sufficient.
CHILD LIFE INSURANCE. Life insurance should be carried only to the extent that others depend upon the income of the insured, whose early demise will leave those people financially destitute. Children don’t fall into this category unless, of course, your kid is Griffin Gluck. Insuring the lives of children is unnecessary and does not guarantee insurability when the child reaches adulthood as some agents would like you to believe. Actuarially speaking, the chances that your child will die in childhood, leaving you with big burial costs are so small, they’re barely worth talking about and a risk parents should agree to self-insure
TRAVEL INSURANCE. Never purchase this kind of insurance before taking a trip. If in the unlikely event the plane crashes or ship sinks, your family is going to sue. This kind of last minute insurance is costly and a major rip-off. Ditto for trip cancellation insurance.
MORTGAGE INSURANCE. Typically overpriced, mortgage insurance (not to be confused with private mortgage insurance, see below) pays off your remaining mortgage balance in the case of your demise. But who says your spouse or heirs will even want to apply insurance proceeds in that way, if such a thing happens? If you have this type of coverage, they’ll have no choice. Far better to buy regular term life insurance if you feel you need additional coverage. Besides, while your premium on mortgage insurance remains the same, the potential benefit is decreasing every month as you pay down the principal.
PRIVATE MORTGAGE INSURANCE. Also referred to as PMI, this is often required by the lender in a mortgage transaction, to be paid for each month by the borrower. However, the moment it can be canceled (typically once the equity reaches 20 percent) it can and should be canceled. Private mortgage insurance offers no benefit at all for the borrower in a mortgage transaction, even though the borrower must pay the premiums.
EXTENDED WARRANTY COVERAGE. What a waste of money. Modern day appliances are of a quality that the chances of needing repair is remote. And if the item does fail, statistically it will fail during the initial period under the manufacturer’s warranty. Taking your chances is more advisable and cheaper. This is the kind of insurance you should be “self-insuring.” That means instead of buying the coverage, you put that same amount of money into a special holding account (just open a savings account in credit union or bank) to either replace or repair that asset. Then when you have no issues with the item purchased, that money is yours—not lining the pockets of an insurance provider. Extended warranty coverage is a colossal consumer rip-off.