Unnecessary Insurance

Risk management is the basis of insurance. Fear of the uncertain future creates the need for financial protection against a catastrophe. However, I recently stumbled on an article that provides reasons why some insurance are unnecessary. I kind of agree on the some of the points made:

1. Mortgage Insurance
Instead of focusing on just paying off the mortgage, wholistic coverage should be considered. In addition, most companys provide large sum discounts. There are term plans that mirror the mortgage insurance coverage, providing reducing coverage without needing you to submit mortgage documents and revising everything when you change residence.

2. Comprehensive Motor Insurance
Most drivers opt for low excess and a comprehensive plan instead of third party plan with higher excess. With the raising cost of motor insurance premiums, it is to your benefit to do some calculation if it is worth paying both an arm and a leg for the maximum coverage. When considering excess, consider the amount you are comfortable to fork out, keeping in mind that once a claim is submitted, your premiums will sky rocket the following year. For example, if you chose $500 excess and a claim for $1000 is submitted, your next premium may be $1500 more and may lose your No Claim Discount (NCD), so does it make sense to claim or pay yourself? In that case, why not adjust your excess higher and pay less premium.

3. Child Insurance
Insurance is mainly designed as a safety net for your dependents. As children do not have dependents to worry about and are, technically speaking, a "liability", the main concern is saving for their future exponentially increasing living expenses. Most important of course is to have an adequate hospitalisation expense plan in place and to review the parents coverage with the addition of this new dependent first.

4. Credit Card Insurance
Purchasing coverage to pay the bill in the event you cannot, is purely an additional expense that could have gone to paying down the bill in the first place. You will save on the premiums as well as the debt interest. Do not even have the debt by paying off your bills on time will be the most prudent approach.

5. Critical Illness Insurance
Instead of trying to cover all the possible illnesses in the world and possibly new illness not even known yet, a comprehensive hospitalisation plan for treatment cost and disability income insurance as income replacement should be emphasized first. Further, nowadays, early stage plans are also gaining popularity, the premiums can be quite significant, so are they indeed worth it?

When choosing Insurance, there are so many policies to chose from, and they all cost money. No point wasting good money on less critical additions when the fundamental basics are not adequately addressed. Are you aware of all the available policies or are you relying on your insurance salesman to recommend you only those high commission products?