6/29/2012 7:05 PM ET|
Insurance you can (and can't) skip
There are policies to cover just about everything, and many of them aren't worth buying. Plus: coverage everyone needs.
Julie Baumann, who lives in the San Francisco Bay area, knows all too well that just because you have insurance, it doesn't mean you are covered. After years of paying high annual premiums for pet insurance, she filed a claim for surgery on her Bernese Mountain Dog. To her surprise, she was told the surgery wasn't covered and she would be stuck with the $6,000 bill.
Baumann isn't alone. Millions of consumers file claims every year against a wide variety of policies only to find the money they spent on insurance premiums was virtually thrown away. Americans spend more than $1.1 trillion on insurance premiums a year, according to the Insurance Information Institute. With coverage available for everything from your wedding day to your cat and your identity, what is worth your hard-earned cash and what's not?
Insurance you can skip
Pet insurance. Considering all the restrictions on most pet-insurance policies, you'd probably be better off setting aside money every year for your pet's health care. In addition to premiums, you also have the responsibility of co-pays, medications and deductibles, which quickly add up. Plus, with most plans, premiums rise and coverage declines as your pet gets older -- and it becomes more likely to need costly procedures.
Home warranty. This covers major appliances and some other assets such as wiring and plumbing. Unless you are buying a home with old appliances and you are unsure about the electrical work, you're probably better off setting money aside for home repairs. Also, with these policies you still may be responsible for deductibles, service charges and proof of non-neglect.
Extended warranties for electronics. When you buy electronics, the salesperson will almost always offer you an extended warranty. Usually, this is worth it is only if you are buying an expensive product that's new to the market or the technology is entirely new. If you opt for this additional coverage, you should not pay more than 10% of the purchase price for the warranty insurance. And besides, if you purchase a high-end product from a quality manufacturer, it comes with some warranty anyway.
Mobile phone insurance. The $7 or so you pay monthly adds up, and if you have to replace an expensive phone, like a smartphone, you're probably looking at a hefty deductible. Further, the phone you get as a replacement from the insurance carrier will almost certainly be refurbished, not new. If you have an expensive smartphone, it may be worth having this coverage if you travel a lot. Or, it could be worthwhile for your children's phones if they're prone to losing or damaging them. But you're probably better off saving older devices you can reactivate.
ID theft insurance. Having your identity stolen is a big, messy headache. But in most cases you won't have to pay for it, thanks to federal consumer-protection laws. For complete information, check out the Federal Trade Commission's ID theft website.
Flight insurance. This isn't travel insurance; it pays out only if your flight crashes. It isn't necessary if you already have life insurance, and even if you don't have life insurance, the odds of this kind of risk are so low as to make the expense unreasonable.
Wedding insurance. Your credit card company may already cover most services covered through a wedding insurance policy. Just make sure you put all deposits for services such as catering and photography on your credit card; don't pay by cash or check. Your homeowners or renters insurance may cover theft or loss of things like rings or gifts.
Insurance you might need
Travelers insurance. This can pay off, but read the fine print -- especially if you have a health condition. If you cancel your trip due to a health problem, you may have to prove it wasn't because of a pre-existing condition. Before buying travelers insurance, check with your credit card company to see whether it offers coverage for travel when expenses are charged to its card.
Insurance you definitely need
Medical insurance. This is a must. If you can't afford full coverage, opt for at least catastrophic coverage. Raise your deductibles to lower your premiums. A lack of coverage for medical expenses associated with catastrophic care is a key reason people go bankrupt.
Auto insurance. This type of coverage is not only necessary, it's required by law. If you need to lower your premiums, consider raising your deductibles. If your car isn't worth insuring, consider sticking with basic liability, which should cover collision damage to the other car if you're in an accident. Be aware that if you are making car payments you may be required to carry collision coverage on your car.
Umbrella insurance. This type of coverage is inexpensive, considering the protection it offers. Umbrella insurance gives you additional coverage on your underlying homeowners and auto policies. It picks up where the other policies end, giving you higher protection in the event you are sued and found liable. Most umbrella policies are about $25 a month for $1 million in coverage.
Renters insurance. This little policy offers a big bang for the buck. Not only will it cover theft or loss from a fire or some other types of disaster, it may include liability coverage or cover items stolen or lost outside the home. Plus, it's affordable, typically about $250 a year.
Tips for finding the best coverage
Once you figure out what kinds of insurance you need, how do you find the policies that fit your situation best? These tips can help:
- Read the fine print and ask questions. You need to be aware of any loopholes and exclusions.
- Check to see if your credit card company protects and covers you in a way similar to an insurance policy.
- Buy insurance only from licensed agents or companies. You can check their status through your state insurance commissioner's office.
- If you have several policies from a single insurer, you may be able eligible for a multiple policy discount.
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Insurance in general is a racket. I am in the process of renewing my Auto and Homeowners insurance and it never ceaes to amaze me the difference in premiums just from different companines which I check every year at renewal time. My car is 7 years old and I have a clean driving record and my insurance seems to increase some every year. It also amazes me the different information concerning "the replacement cost" on my home. One agent had 151,000 and the other had 157,500 and the interesting part is the 157,500 policy premium was cheaper by 25.00. I just dont get it. Like I said a "RACKET"
I agree with all but one item in the article. I purchased the home warranty on my last two homes. Both had some age on them and the warranty has paid for itself each year. Yes, I have a $50 to $60 deductible, but have you looked at what service calls cost. The home I am in now, the warranty paid for a new heat pump system and new air handler in the house.
I would not add it to a brand new home until the warranty period is well over, but then you never know when there could be a problem not covered by the warranties provided.
It is always better to buy from an independent agent. They have a wide selection of companies and work for the client. they are not employees of any insurance company. They also have a much broader understanding coverage and claim experience from carrier to carrier as well as the vast majortiy of advanced insurance education certificates such as a CPCU or a CIC verses other places to buy coverage. The majority of Independent agents will evalutate coverage and only sell the lowest price when it is in the client's best interest and never cut coverage to make the price appear cheaper as many on-line and 800 number companies will often do.
Lastly, independent agent's own the legal rights to the client, rather than the company. This gives a good independent agent the abilty to have a lot more clout and input in the event there is a claim problem. Most of the 800 number "agents," while licensed, only know what their employer has taught them rather than an understanding the business as a whole.
I also just checked out auto and house insurance as my policies were up for annual renewal. I checked with 7-8 different companies ( the big ones who advertise ALOT on tv, AARP, AAA, etc. ) and my current company was the lowest in price. ( I switched to them 2 years ago when the ins. company I had for 20+ years for my home and car ins. suddenly raised my rates without any accidents or house claims.) My house ins. went from $1200 down to $ 633 for the identical coverage, deductibles, etc. I even game my old ins company ( S.F. ) a chance to match or get close to the new rate, but they were very indifferent and said they could not match the rate. A real nice "Thank You' for 20 years of being a loyal customer.
My current company wanted to raise my house ins. this year from $ 788 a year to $916 a year. I was able to lower the rate to $ 760 by increasing my deductible from $ 500 to $ 1000, and also going with just replacement value of my home, instead of 150% of the home value. ( I feel the replacement is too high anyway, but no other ins. company could match or beat the rate even with a lower home replacement value.
To make a long suggestion short, Shop Around ! Spend a little time on the phone or computer and you could save yourself several hundred dollars. And make sure to always compare apples to apples; same liability coverage, same deductibles, etc... Hope this helps you.
The kittens are under Banfield's maintenance plan (PetSmart), and I will move my older cat to their senior plan this fall. Banfield's plan is pretty good, but it really only covers preventative maintenance, although you get a discount if your pet has an illness or injury. (I did the math, and it will actually save me some money this year; not a lot, but every little bit helps.) If you sell or give away your pet, the coverage does not transfer and you cannot cancel it, so make sure you're going to have the pet for the long haul. I would say, if you travel a lot (we do) or if you have a purebred animal that's susceptible to certain illnesses, look into pet insurance, but read the policy thoroughly before you sign up.
I have been paying for pet insurance for 4 + years on our cat. I am thinking about dropping it at
$22 a month after reading article. Let me know what you think. He is 6-7 years old.
This article forgot to mention Whole Life Insurance. I paid off a whole life Insurance policy and when I cashed it in a time of an emergency I only got half the money back. I definitely would not recommend investing in a whole life insurance policy.
Wedding insurance is a must. I've seen it in action. Companies go out of business and will leave you stranded only a few months out from your big day.
Rain insurance for outdoor events such as weddings, festivals and concerts is a must as well. If you've hired me to run sound and the event has a gully washer, I've made my money and you're not getting it back.
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Cheap LED light bulbs cost more upfront -- between $8 to $10 apiece -- but begin to pay off within 18 months.
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