5 Insurance Policies To Avoid

Fear of the future and uncertainty is one of the best selling tactic used by insurance sales people. Insurance companies understand this fear and use it against you. Before I go any further, I will tell you that insurance must be included in your financial planning strategies. The key is to chose the correct insurance for your situation.

Insurance is about transferring risk - risk that you cannot take or do not want to take. Unfortunately many people waste money on insurance products that they do not need and never will use. Here I share five insurance products that you should avoid:

• Extended warranties - how many times when you go to the electronics store you are asked to buy an extended warranty. These type of policies are rarely used, particularly on small items. If you purchase a product from a reputable manufacturer, must likely it will work as advertised. So do not take the bait!
• Flight insurance - This one is completely unnecessary. Your life insurance policy should already cover you in the event of catastrophe. If you are not certain and you travel a lot, contact your insurance agent.
• Accidental death & dismemberment (aka AD&D) - Unless you are a driving calamity (constantly involved in car accidents), the use of this policy would be near zero. The coverage provided by these policies are covered by most of the reputable health and/or life insurances. Also, the manner these policies are written makes it difficult to collect.
• Mortgage life insurance - they pay off your mortgage in the event of your death. A valid concern, the desire to avoid leaving our families with debt burden. However, you accomplish this through other methods in your financial plan. If you still want to have an insurance to specifically address this concern, then go for decreasing term insurance. 
• Credit card insurance - another money waster, this one pays your credit card bills in the event you cannot pay. Interesting concept. I have a better idea, avoid running your credit cards and becoming a debt slave. This way you do not need to worry about the credit card bills.

There are a variety of insurance policies to choose from, and they all cost money. While it is prudent to maintain certain levels of insurance protection, you must be careful in selecting the right coverage. The goal is to provide your family the greatest protection against risk at the lowest cost possible. Remember the more risk you transfer to the insurance company the more you have to pay in premiums. Always read your insurance policies and ask questions to make sure you understand what you are purchasing and understand its limitations.