Types of Insurance Policies You Don't Need

There are many types of insurance that people don't need. These types have one thing in common; they are hugely profitable to insurance companies because less is paid out than with other forms of insurance. Here are some I found that are really not needed and might be a waste of money.

Accidental Death Insurance

Between the ages of 45 and 64, accidents are the most frequent cause of death. They cause less than 5% of all deaths between these ages. However it is said to be a waste of money to purchase this kind of insurance because the chance of the people you are trying to protect financially have a slim chance of receiving their payout. Even though it is less expensive there is a very little chance of accidental death even happening. Remember between the ages of 45 and 64 it is only a 5% chance of this happening and after the age of 65 and older it is only a 2% chance of an accident happening. You loved ones would be much better off in the long run with a term life insurance policy.

Cancer insurance

Most cancers are not even covered with this type of program. Take skin cancer for instance, it is usually not covered so this would be a waste of money also. It could cost more than $400 each year to purchase a policy with huge dollar benefits. But your chances of collecting are very small. Seniors under the age of 65 would be much better off putting those premiums into a health plan that covers all medical issues. For people who are 65 and older, that $400 a year will cover Medicare's Part D prescription drug coverage.

Car Rental Insurance

Make sure before you purchase this type of insurance that you check your car insurance policy to see if you're already covered. Most likely you're already covered and if you are don't waste your money because this can double your daily rental charges.

Credit and Mortgage Disability Insurance

A popular policy with the banks and credit cards because in most states they get 40% commission on every dollar premium you pay. These policies pay the minimum installment on your loan or credit card usually for up to 36 months if you're disabled according to the terms of policy. The best thing to do would be to maximize the short and long term disability coverage that your place of employment might offer. This way not only can your installments be covered but also your other expenses as well. Not only that but with comparing the cost of your insurance, the coverage you might get at work will cost much less per dollar of benefit than this type of insurance.

Credit and Mortgage Life Insurance

These are also highly profitable for the banks and credit card companies because of the commission they gain. Instead of purchasing this just buy or add from your term life insurance in order to protect your family. This way is more affordable. If you purchase this type of insurance instead of just adding to your term life insurance then you will be paying four times more for this. Buying or just adding to your term life insurance will be much more affordable in the long run.

Credit Card Fraud Protection

You're already covered. By law you only have to repay about $50 of any unauthorized charges to your credit card. And if you tell your major credit card company about the fraudulent charges or if your credit card has been lost or stolen, they will most likely waive the $50 fee costing you nothing. So why purchase this and waste your money?

Extended Product Warranties

Most of time this will be a waste of money. Nearly all sales clerks will try to get you to purchase this but in the end they only pay about 30 cents on the dollar. Then the store makes about 70% profit off of each one they sell. You'll probably never use it anyway so it is a waste of money.

Flight Insurance

This is extremely expensive. Why do you need this when there is a low possibility of even being in a plane crash to begin with? Don't waste your money on this type of insurance because you will be paying out too much for something you will probably never use anyway. Now if there was a higher possibility of a plane crash then it might be worth it but the possibility is very low.

Hospital Indemnity Insurance

This type of insurance sounds good at first because they pay you $100 for everyday you are in the hospital. This is a big waste of money for two reasons; Most hospitals will discharge you after only a couple of days anyway and even if you are getting $100 a day for being in the hospital without health insurance this won't do any good. The reason for this is because $100 a day will not even come close to covering even your room charge. It usually costs $1600 a day just for your room let alone the huge bill you will get for everything else if your not covered by health insurance. Those who don't have health insurance will think this $100 a day will cover most of their hospital expenses but it hardly even puts a dent into it.

Unemployment Insurance

This type of policy is sold by credit card companies or other lending companies to make your minimum payments on credit cards or loans for up to a year if you lose your job. There really is no need for this because you can rely on your emergency funds to make these payments. Information on Emergency Funds can be found below.

Emergency Funds

How large should this be? With today's economy it is often difficult to find another job in time to pay bills. It is recommended, if possible, to set aside money for at least three to six months. Keep these funds in your checking, savings, or money market fund so you can cash out at anytime. In the chance of not having enough in your emergency fund, it is recommended to apply for a home equity line of credit instead of a home equity loan. There is a big difference between the two. With a home equity loan you will be paying out interest on your entire outstanding balance but with a home equity line of credit there is no interest to pay unless you actually take some money out and that is only on the money you withdraw. It is highly recommended to not use your line of credit until is an actual emergency.

A couple of smart money tips that you should think of are to apply for your line of credit while you still have a job because it is nearly impossible to get this without a job. Also if your emergency funds are nearly exhausted you can take money out of your Roth IRA with no penalties or taxes if your withdrawal is limited to only the sum of your contributions.

Make sure to think about these before purchasing any types of insurances and try to start your emergency funds as soon as possible while still working. This can be extremely difficult with everything coming out of your monthly payments but this could save you a good bit of money in the long run as well as having that extra cash if you lose your job or retire.