Insurance you shouldn’t buy - MoneySense

Insurance you shouldn’t buy

I’m a big believer in having enough insurance. But it has to be the right kind.



Having insurance falls under Gail Rule #4: Mitigate Your Risks. But “the right kind” of insurance is often confusing for folks. So here are three types of insurance you should skip and save your money.

Mortgage life insurance
If you have a mortgage you’ve no doubt been offered mortgage life insurance by your lender. Don’t buy it. It’s expensive. It’s single-purpose. And it can be denied down the road, since it isn’t “approved” until you try to make a claim, which is not when you want to find out you aren’t covered.

Instead, make sure you take your mortgage balance into account when you’re buying your regular life insurance. If you don’t have enough life insurance to take care of your new whopper of a mortgage, look into term insurance, as opposed to buying the dumb policy your lender is offering you.

Flight accident insurance
Tempted to buy this kind of insurance because of their fear of flying and certainty that they’re gonna die, scaredy-cat fliers waste money! But you’re more likely to win the lottery than die in a plane crash, and you’re more likely to be struck by lightening twice than win the lottery.

If you have adequate life insurance in the first place, you don’t have to waste money on insuring your life against an event that has very little chance of actually occurring.

Accidental death insurance
You know all those ads that offer you five times your coverage if you die accidentally? You know why they’re being so generous? They know you’re not going to collect.

When you die, it doesn’t matter if it was an accident or not, you’re dead, and traditional life insurance will pay either way. There is no need for extra protection based on how you died. If you’re delusional enough to think you can get away with a minimum of insurance as long as you have extra insurance for accidental death, give your head a shake.