The Worst Buys in Insurance .edu



The Worst Buys in Insurance

Are you one of the many people who avoid the words "Life Insurance" as if they somehow represented the Grim Reaper, standing before you with scythe in hand? If so, you are the exact type of person insurance companies have targeted for "specialized" insurance coverage.

Many people have at some time purchased cancer insurance, credit insurance, mortgage insurance or accidental death insurance. They are all life insurance. Aside from the name change, they all share one other major quality -- the coverage excludes all forms of death other than the one named in the title. These policies are typically very cheap to buy. The reason is that the odds of you ever collecting on your policy are very poor. In fact, unless you have a terrible gambling habit you would never accept odds so stacked against you in Vegas.

Let's take a closer look at these and other "bad bets" in insurance:

Cancer insurance:

If you die from cancer you will collect. Any other form of death leaves your family out of luck. The health insurance version of this coverage is equally unwise. A good standard health policy will cover most hospital and doctor bills, including those related to cancer.

Credit insurance:

If you die your creditors get paid. The fees seem very cheap until you examine them closer. If you insure a three year loan of $5000, it will cost you $12 a

month and the coverage will decrease with the loan. A middle aged man could buy $250,000 in term life insurance for $29 a month. Do the math. Better still, your family collects first on the term life policy, not the bank.

Accidental Death:

Many people say they do not need "additional" life insurance because they already have accidental life insurance through their bank or mail. Some clients don't even know the difference. Despite what your newspaper headlines might indicate, the odds against you dying in an accident as opposed to any other method are huge. If you are not sure what your own "cheap" life policy actually covers, find out.

Mortgage Insurance:

There is only one real difference between decreasing term life insurance and "mortgage" life insurance -- mortgage life insurance costs more (do not confuse mortgage life insurance with the "PMI" you are forced to buy when buying a new home).

Insurance companies came out with this higher priced insurance because they know some people will buy the coverage as long is it does not carry the evil title of "Life Insurance" on it.

Air-Travel Life Insurance:

This "coverage" shouldn’t be dignified by spending any time on it. If you watch the news at night, then you know the odds of dying in a plane crash. It does serve a purpose -- as a gag gift to departing friends. Get real life insurance if you care about your loved ones.

Rental-Car Insurance:

The per-day insurance cost from car rental companies is very high. Most of the time you may not be told, but your own auto insurance policy may

already cover rental cars for liability and damage to the rental car. Call your agent before you rent.

Auto Insurance Medical Riders:

Any good health plan will cover your medical expenses, and adequate liability coverage (which is very inexpensive) will cover the medical expenses of your non-family passengers.

New "specialty" products come out frequently. Learn to look at these policies carefully and apply a little common sense before you buy. Nothing beats a comprehensive policy for value. If you still fear the Reaper, close your eyes and sign that life insurance application anyway. That way he won't be laughing at you when you finally meet for real.

Lou Gorr, Extension Agent, Prince George County Office

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download