Insurance Policy: Investment or Expense?
February 16, 2009 by MOYMJennifer
Filed under Insurance
If you own a goose that laid golden eggs, which would you insure, the eggs or the goose? A tricky question, isn’t it? Actually, you can just insure anything you want. A bigger question though is: is it significant to insure that ‘something’?
It’s a basic norm of insurance to cover your big risks in life, which includes your life, your health, your home and your car. Better safe than sorry, they say! Your insurance should not only be comprehensive but it should also be geared towards encompassing catastrophic situations that can cause economic hardship. If it’s not any of these things, then, paying for its insurance may just be a waste of money.
Common Insurance Policies to Avoid
Cancer Insurance is a no-no! Your comprehensive medical insurance covers all illness, no matter form you develop. Dread disease insurance or critical illness insurance policies are redundant. After all, there’s a “benefit clause” in health insurance policies stipulating that it won’t pay duplicate benefits. It would be better to get a disability plan instead of the critical illness plan; the disability plan will cover a portion of your income if by some chance you have to go on medical leave due to a disability.
Pet insurance is another policy you should probably avoid. Although it lessens the burden on pet owners on costs associated with veterinary care such as vaccinations and surgery, the coverage excludes a number of diseases inflicted on purebred animals. Some wouldn’t even cover ailment from one contract year to the next, since previous year’s ailment is already considered “pre-existing.”
Life Insurance for Infants also deserves a second thought. Be reminded that the main purpose of this is to shoulder the burial costs should the baby die. What are the chances that the baby will die? Well, while it is true that if the child reaches 18, the cash value of the policy can cover his college expenses, there are far better “tax-free 529 college-savings” plans or alternatives available in the market.
You should also steer clear of accidental death benefit plans. Most people die a natural death, unless those exposed in dangerous jobs e.g. stunt man, construction worker – in which case, you actually become “uninsurable.”
A no-brainer is the mortgage life insurance. Commonly, this is bought because the insurer wants to protect his family from mortgage payments if he dies before paying off his mortgage. Yet, where is logic if the death benefit decreases as the mortgage is paid down?
Is there a need for travel insurance? It depends. People don’t really need this one unless they are seriously ill and relapse or attacks may occur, or if they are planning an expensive trip where rescheduling is tough.
The other plans to shun, according to experts, are the whole life insurance, insurance against inconveniences, identity theft, “clunker” insurance, extended warranties and payment protection insurance.
Final Word
Buying insurance packages is actually a personal decision. No one person can say which is proper, and which is not. You just have to know which ones are actually necessary. Steer clear of redundant or repetitive insurance, and insurance which isn’t necessary or practical. Remember, insurance companies are not only there to provide you security; they are, first and foremost in the underwriting game for profit.
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