Insurance don’t Waste your Money Insuring unlikely Risks

For most people, it’s the fear of the unknown that provides motivation to take out insurance policies, to mitigate financial loss in the event of an unpredicted event. But have you ever taken a close look at the insurance you have and asked yourself if it’s really going to provide you what you thought it would?

Here’s a close look at a few insurance policies that most people have, that you may want to check twice to see if it’s the best option for you.

1.  Private Mortgage Insurance

Most people are familiar with Private Mortgage Insurance (PMI) as it’s often a lender requirement when taking out a mortgage if you are borrowing more than 80 percent of the property purchase price.   PMI is insurance that protects the lender against loss when lending to a higher-risk borrower. The borrower pays for this insurance in its entirety, but the only beneficiary to the policy is the bank. You can save yourself some money by avoiding PMI by making at least a 20 percent down payment when taking out a mortgage, or if you need to finance in excess of 80 percent of the purchase price, take out two mortgages on the one property – one for 80 percent, and the other for 10 percent.  As both mortgages do not exceed the 80 percent rule, you’ll be saving on PMI premiums, whilst still purchasing with a lower down payment.

2.  Auto Collision Insurance

Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. If you have a loan or lease on the car, your financier is likely to require that you have collision insurance. If you have free title to your vehicle, collision insurance is optional, and at that point you need to make a decision on if you can afford the cost of a new car – or if you want to pay collision premiums as a safeguard instead.  If you are driving an old car, it may make better sense to put the money you would spend on collision premiums into a savings account instead.

3. Accidental-Death Insurance

If you already have a general life insurance policy, this is probably sufficient coverage for you, so you need to ask yourself if you really need accidental death coverage in addition. Speak to your insurance advisor and make sure your general insurance policy provides sufficient coverage levels so that an accidental death policy is unnecessary.

4. Extended Warranties

Extended warranties are offered on almost every electronic product, from Plasma Televisions to Nintendo DS Games, but take a look at the fine print, and figure out if it’s really worth it.  An extended warranty typically covers the costs of repairing or replacing an item during the same period when the manufacturer’s warranty runs — and extends for an additional period of time beyond that. It’s possible that  the product you buy may never need a repair at all, or is a product that you will regularly upgrade, such as a cell phone, so paying for an extended warranty may possibly be a waste of money. Some  products are more likely than others to need repairs within the first three years from date of purchase, so think twice about the type of product it is before you spend extra cash on an extended warranty with your next electronic product.

5. Rental Car Insurance

Many auto insurance policies offer the additional coverage for the cost of a car rental in the event your vehicle is ever involved in an accident and needs to spend some time off the road whilst being repaired. Whilst this sounds like a great feature of your insurance, the reality is that most people rarely rent a car, and when they do, the cost is so low it is hardly worth taking out insurance for the possibility that you may need a rental vehicle. Checkout your policy details and see if it makes more sense for you to pay for a few days car rental if you need it, rather than an additional premium each month.

6. Car Rental Damage Insurance

Your personal auto insurance often covers rentals, so there’s no need to pay for this twice. Check your policy in advance of renting a vehicle to see if you need Car Rental Insurance. If your personal auto policy covers rentals, make sure you take a copy of the policy as proof of insurance when you next rent a vehicle.

7. Credit Card Insurance

Most credit card companies push heavily insurance premiums to cover paying your credit cards minimum payment in the event you cannot pay. But check the fine print, because credit card insurance only kicks in after certain events, such as job loss or disability and there is often a waiting period which will potentially put your credit card in default if you don’t make the minimum payments in that period anyway.  Avoid maxing out your credit cards and keep a safety net of savings to keep you covered in the event of a loss of income.

8. Credit Card Loss Insurance

Federal law limits your liability if your credit card is stolen. Your out-of-pocket costs are limited to $50 per card, and in the case of genuine fraud or identity theft, many credit card companies don’t even try to collect the $50. 

9. Flight Insurance

Not to be confused with general travel insurance, Flight insurance coverage is unnecessary.  Airline accidents are extremely rare, and your life insurance policy should provide coverage in the event of you being in an Airline Accident.  Check your personal life insurance policy before you pay excess premiums.

10. Mortgage Life Insurance

Mortgage life insurance pays off your house in the event of your death, but its probably cheaper to get a term-life policy instead. Ensure your life insurance policy will provide enough money for your beneficiary to to pay off the mortgage and still leave a substantial balance for your heirs and beneficiaries.

11. Unemployment Insurance

Unemployment insurance is designed to make the minimum payments on your bills if you become unemployed.  Instead of paying for an insurance premium, build up a savings account that is your emergency funds to tap into if you ever suffer the loss of an income.

12. Disease Insurance

Specific policies are available to cover cancer, heart disease and other major illnesses. Instead of trying to cover yourself for a specific disease that you may never even get, take out a medical coverage policy instead, and make sure that your comfortable with the levels of coverage that the plan provides. Often, taking out a higher medical coverage policy is cheaper than having a general medical coverage policy and a disease specific policy as well.

Before you take out any insurance policy, read it carefully to make sure that you understand what it covers, the terms, coverage levels and the total cost.