It's always better to be safe than sorry, and insurance policies can sure make you feel well protected. However, buying your peace of mind can be quite expensive, so you want to make sure that you're spending money on the right insurance policies. Here are insurance policies you should consider forgoing:
- Pet insurance: If you total the medical costs incurred in a pet's lifetime versus the cost of pet insurance coverage, the policies are often found to be unnecessary, Bob Hunter, the director of insurance at Consumer Federation of America tells SmartMoney. Unlike human insurance, you also have to pay all the costs up front and wait for the providers to reimburse you because there isn't a co-pay system.
- Trip cancellation: If you can't make it to a flight because something came up at work or a pre-existing medical condition, you won't get your money back if you bought a trip cancellation policy. On most of the trip cancellation policies, the reasons that will get you a refund are pretty extreme — you or a family member has to suffer from an illness, injury, death, natural disaster. Unless you invested a lot of money in the trip, you might want to skip this policy.
- Divorce or wedding insurance: If you've been paying for divorce or wedding insurance, you'll be covered if you have the misfortune of canceling your wedding or getting a divorce. This option isn't favored by a lot of the people because of the negative image it, and financial planners aren't fans as well. Glenn Daily, an insurance consultant, tells the WSJ that a good emergency fund would easily foot the expenses that divorce or wedding insurance would cover and describes it as "insurance you could live without."
- Extended warranties: Extended warranties on products are generally something you can do without. In fact, you are probably already protected with the manufacturer's warranty or your credit card company. Consumer Reports found that appliances generally don't break during their warranty period and if it does break down, the price it takes to repair the product will cost the same as warranty.
- Life insurance for children: Life insurance is meant to provide dependents with financial support when the breadwinner passes away. Your children aren't supporting you so this begets the point of this type of life insurance.
- Specialty disease insurance: Specialty disease insurance policies like cancer insurance, heart attack insurance, and stroke insurance that are unnecessary. A comprehensive health insurance plan will cover you if you ever become diagnosed with one of these medical problems. Further, it can even nullify some of the benefits distributed by your regular health insurance plan.
- Private mortgage insurance: PMI is required when you can't put 20 percent down for the down payment of a house you want to buy. This insurance is tacked onto your monthly mortgage and interest payments and is of no benefit to you. Instead, it protects the bank when they're dealing with borrowers who have higher risk of defaulting. Wait until you can afford the 20 percent down payment before buying the house so you don't have to pay for PMI.