GOOD READS

Insurance Features That You Shouldn't Get

Insurance is a very important part of financial planning, and it is usually practical to get enough insurance to cover financial losses. However, it is usually impractical to be over insured, and even worse to buy insurance that you don't need. Many will agree that it is wise to buy life insurance to provide for loved ones in the event of a premature death, home and auto insurance help us protect our assets and medical insurance to cover healthcare expenses. The question then becomes, 'which type of insurance should you consider ignoring?'

Life Insurance for Minor Children
The primary reason for obtaining life insurance is to replace the income of the decedent, and/or to provide a financial resource for surviving family members. As a result, life insurance is usually recommended and suitable for individuals who have others relying on them for financial security. Obviously, this would not be the case for your minor child, as, if he or she dies, he or she would not be providing financial support for you and other family members. Instead of buying life insurance for a minor child, consider using the amount earmarked for the premium to fund an education account, which can be transferred to a sibling or another eligible family member in the event of the child's death.

Natural Disaster Insurance
One of the major concerns for homeowners is trying to protect their homes, which is usually their largest and most expensive asset. As a result, some may feel the need to purchase natural disaster insurance. While this may be practical if you live in an area prone to natural disasters, you may be wasting your money if you live in an area where there is little to no chance of your house being destroyed by a natural disaster. Consider doing some research about the history of natural disasters in your area. If there are no historical occurrences, then chances are slim that you will have that experience.

Extended Warranties
Extended warranties are used to replace appliances and the like. However, such insurance is usually impractical. Depending on how much the item costs, you might end up spending as much as you did for the appliance to have it insured, and more often than not, the cost of the insurance is more than it would cost to get the item repaired. Most appliances come with a manufacturer's warranty, and if yours does not, consider purchasing the item with a credit card that provides insurance for such items. If you planned to pay cash for the item, you can avoid interest charges by paying off the credit balance immediately.

Mortgage Life Insurance
If you own a home, then it is likely that you have been bombarded with offers to sell you mortgage life insurance, which promises to pay off your mortgage balance in the event of your death. This may sound good at first, but consider that the lender is the beneficiary. You may be better of spending the same amount for a term life insurance plan which could leave your loved ones with enough to pay off the mortgage on your home and still have some left over.

SEE: 15 Insurance Policies You Don't Need

The Bottom Line
One of the key factors for making wise decisions when it comes to insurance is to look at it as an investment as opposed to a cost of living expense. When you invest, the objective is usually to get back more than what you put in. With a cost of living expense, there is usually very little expectation for any return or earnings on the amount spent. If you are faced with the decision to purchase an insurance policy, consider whether the amount that you will spend on premiums would be worth the risk that you want to cover, and whether it would be more cost effective to replace the item if it is damaged, or explore other means of protection.



More From Investopedia

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk
1
2
3
4
5
6
7
8
9
10

Latest News

  • Need to expedite Indo-EU FTA after new government comes: Envoy

    New Delhi, April 20 (IANS) The new Indian government should expedite negotiations on the Indo-European Union (IEU) free trade agreement (FTA), says German Ambassador to India Michael Steiner. However, the Indian automobiles industry has raised an alarm over the sector being included in the FTA, claiming it will kill investments and technology flow into the country, resulting in under-achievement of the government's automotive mission plan. Negotiations on the FTA, officially dubbed the …

  • Hyundai Motor unveils small SUV concept for China, to launch this year

    South Korea's Hyundai Motor on Sunday unveiled its small sport utility vehicle (SUV) concept targeted at the Chinese market, planning to join a flurry of rivals in tapping the growing segment in the world's biggest market. Hyundai said it had picked popular Korean actor Kim Soo-hyun to promote the subcompact SUV ix25, to capitalise on the Korean pop culture boom in wooing Chinese customers aged between 25 and 35. Small SUVs are a bright spot in key markets from China and India to the United …

  • Rajaratnam's brother loses bid to dismiss insider trading charges
    Rajaratnam's brother loses bid to dismiss insider trading charges

    Rengan Rajaratnam, the younger brother of imprisoned hedge fund manager Raj Rajaratnam, on Friday lost a bid to dismiss some of the insider trading charges leveled against him last year. U.S. District Judge Naomi Reice Buchwald in Manhattan ruled that the indictment adequately alleged the essential elements of the crimes charged. A lawyer for Rajaratnam did not respond to a request for comment. A spokeswoman for Manhattan U.S. Attorney Preet Bharara declined to comment. …

  • English as she is spoke

    Well, one explanation is that since the car's shock absorber was defective, the tyre punctured when the vehicle went over a pothole! Such is the flexibility of the English language that no matter how much it is bent, twisted or warped, it still manages to convey what is sought to be conveyed. Needless to say that like a true Brit, Sir Mark Tully, formerly of the BBC, kept a stiff upper lip when informed of this nugget. …

  • Karnataka government orders Toyota, union to restore operations
    Karnataka government orders Toyota, union to restore operations

    Karnataka government has ordered Toyota Motor Corp and its union to restore normal operations at its local factories immediately after a month-long standoff between the Japanese auto maker and its workers, the company said. The move comes after many unionised workers at Toyota's two Indian plants near Bangalore refused to return to work despite the ending of a lockout last month over a pay dispute. Neither Toyota nor union officials at the Karnataka plants were reachable for comment over how …

IN-DEPTH ANALYSIS & INTERVIEWS

  • This might well be India’s biggest Ponzi scam

    It was just too good to be true. Ashok Khital, 45, displays every symptom of a man who knows he's been conned. …

  • India's star studded football league

    High and mighty including Sachin, Salman & Sun Group buy ISL teams …

  • Leaderspeak with Rajesh Janey

    Rajesh Janey, President - India & SAARC, EMC shares many firsts in his life. …

  • Seed of Doubt

    Field trials have been allowed again in India. But two decades after their global launch, genetically modified (GM) crops remain controversial. …

  • Power Hungry

    Gujarat has power round-the-clock. Most other states do not. Why this will matter in the general elections. …

  • Etcetera

    The most keenly watched contest of the current general election will be the one for the Varanasi parliamentary seat, where the Bharatiya Janata Party's prime ministerial hopeful Narendra Modi squares off ... …

  • Economy vs Democracy

    As the country gets election fever, cash comes out of mattresses and turns into liquor, gifts, and food. But it is not bad for the health of the economy, reports Sarika Malhotra from the trenches. …

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    16.52+0.88+5.63%
    UNITECH.BO
    73.85+3.05+4.31%
    HDIL.BO
    13.36+0.25+1.91%
    SUZLON.BO
    718.55-6.70-0.92%
    HDFCBANKSL.BO
    57.40+2.75+5.03%
    JAIPRA.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    12.60+2.10+20.00%
    AGRIMONY.BO
    242.50+40.40+19.99%
    ACRYSIL.BO
    83.50+13.90+19.97%
    SICAL.BO
    46.00+7.65+19.95%
    SHRGLTR.BO
    65.25+10.85+19.94%
    AHLUCONT.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    11.60-2.70-18.88%
    ANISHAIMPEX.BO
    51.10-8.85-14.76%
    WINSOMTX.BO
    11.70-1.30-10.00%
    BLCISER.BO
    425.00-40.00-8.60%
    GCMSECU.BO
    59.40-5.55-8.55%
    JBML.BO
  •  
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

    •  
      Sign-in to view quotes in your portfolios.