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Insurance: What Not to Buy

There is no shortage of unnecessary policies on the market. Here is a guide to help you avoid the plans that you don't need.

  1. Private mortgage insurance (PMI). About 25% of all homebuyers have to purchase PMI. When you buy a new home, your lender wants to make sure that you don't default on the loan. For this reason, if your down payment is less than 20%, you will probably have to purchase PMI. This is not a wise decision financially, as you would be hard-pressed to find an affordable of this type. Try to avoid PMI at all costs. You can circumvent PMI altogether if you save up enough money to make a 20% down payment. You are better off waiting to buy your home until you've saved enough rather than pouring money into PMI.
  2. Pet coverage. Some of our customers express interest in a cheap insurance policy for their pet's healthcare. This is not surprising when you consider that Americans spend over $10 billion on veterinary care each year. Even if you find an affordable quote on pet insurance, it's usually not worth the money. For one, very few vets and animal hospitals take pet coverage because it delays their reimbursement. Secondly, the average pet insurance policy will cost you about $700 annually, when the average check up for a cat or dog is only about $150. You are better off just budgeting for pet expenses and avoiding these costly policies.
  3. Life insurance for children. Trying to find an affordable quote on a policy for you or your spouse is a good idea, but your children could probably go without it. A good rule of thumb for this type of protection is that you only need it if you have dependents or debts. Kids usually don't have either, which makes this policy superfluous. You are better off getting affordable pricing estimates on your own policy or upping your current coverage. Something is much more likely to happen to you than your children, and your death would have more of an impact on the family financially.
  4. Flight insurance. You might come across some affordable policies for this type of protection. Strictly speaking, there isn't a product called flight coverage, but it is an option under death and dismemberment coverage. Because the odds of something happening on a flight are so slim, this coverage isn't worth it.
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Check out all of the policies you probably shouldn't buy.