Are you over insured? In this economy we are all looking for ways to cut back and use our dollars wisely and still be financially responsible. Insurance can be wise, but here are a few kinds of insurance that can be unnecessary.
PMI – Private Mortgage Insurance (PMI) is an insurance policy that protects the lender (not you) against a potential loss when lending to a borrower (you). PMI is only required if you put a down payment less than 20% of the home’s value. If you currently have PMI on your mortgage, check with your lender to see if you have reached the 80% value on your loan yet and get the PMI dropped.
Extended Warranties – when you buy a screwdriver at the hardware store, they now ask you if you want the Extended Warranty. Pass on it unless you feel the purchase was large enough to warrant an extended warranty. For the most part, if you bought a product from a reputable brand, an extended warranty is another unnecessary cost.
Life Insurance for Children – statistically, most children grow up safe and healthy. And since they also don’t have heirs to be financially responsible for, life insurance for your children is typically not needed. But, a 529 College Savings Plan or IRA set up for their education would be a solid investment.
Mortgage Life Insurance – Mortgage Life Insurance is set up to pay off your mortgage in the event of your death. A term life insurance policy is a better investment. In the event of your death, there will be more bills to pay than just the mortgage and a good insurance policy will have more than enough to cover a mortgage.
Unemployment Insurance – Unemployment Insurance covers bills in the event that you lose your job. Sounds like a good idea until you actually lose your job and have to come up with money to pay the insurance premium too. A better idea is to build up an emergency savings fund to prepare for unforeseen financial issues.