Money Matters: Unnecessary Insurance

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Wednesday, October 26th, 2011

Fear of the future sells insurance because we can't predict the future. But Lisa Smith of Investopedia Dot Com says there are things worth insuring against. But there a number of policies that you may be better off without.

And here are the ones Smith says you can live without.

1. Private Mortgage Insurance. PMI protects the lender against the home owner defaulting on the mortgage. It's required if you are putting less than 20% down on your home. So put down just over 20% and you won't need PMI. You'll save thousands of dollars over the first few years of the loan.
2. Extended Warranties. Available on a host of appliances and electronics. The law of averages shows most appliances these days don't break down in the first few years. For small items less than a couple of hundred dollars it makes no sense at all.
3. Automobile Collision. The auto lender may require collision. However, if your car is paid off, collision is optional. If it's an older car collision insurance may not be worth the expense.
4. Flight Insurance. Despite media portrayal airline accidents are relatively rare and most people have life insurance coverage in the event of a catastrophe.
5. Life Insurance for Children. Life insurance is designed to provide living expenses in the event the family breadwinner dies. Instead of spending the money put the same amount in an retirement or college savings account.
6. Mortgage Life Insurance - It pays off your house in the event of your death. But you'd be better off getting a term life policy. After all the mortgage is the only bill your family will have if you're gone.

Insurance can be a good thing. Car liability is required. Home owners and renter's insurance is a must to protect against fire and theft. Other policies make economic sense. Just make sure you carefully analyze the risk versus cost.


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