What You Don’t Need Insurance For

In previous articles we talked about some of the things you need insurance for. The basic message given was to insure the important things in your life, the things which if you lost would cause you to loose a significant amount of money.

We also touched upon some of the things you don’t need to insure, but people often do. So in this article we shall explore more of these things which you would be better off not insuring, and saving your money for something else instead.

Extended Warranties

If you buy a new piece of electronic equipment such as a laptop or television, it will come with a standard manufacturer’s warranty.

This will usually last for one year, in which your item can be replaced or repaired for free if it develops a fault.

Extended warranties are usually offered by the shop you purchased that item from, and will cover you against faults after the manufacturers warranty has expired.

The trouble with extended warranties is that they can be a real hassle when it comes to making a claim.

Not only do you have to hope that the fault your item has developed is covered by the extended warranty (which it sometimes isn’t), but you will also have to wait a long time for your item to be repaired.

For this reason it is generally recommended to avoid taking out extended warranties, as they are usually just a waste of money.

If your product does develop a fault, in most cases it would work out cheaper and faster to get it repaired or replaced by yourself.

Dental Insurance

The only time you should take out dental insurance is if your employer offers it to you under a dental plan.

Otherwise dental insurance is not worth having, because it usually doesn’t cover extensive work that you might require.

As a result, dental insurance is not cost effective for the few check ups and cleanings you have done each year.

Flight Insurance

Flight insurance provides you with cover should you die on a commercial plane. This type of insurance plays on people’s fear of flying, and you would be better off having life insurance instead.

Credit Life And Disability Insurance

This insurance is sold by credit card companies, and will pay a pre-determined amount to your beneficiaries if you die with credit card debt.

But this insurance usually only covers one card, so if you have debt spread over multiple cards, this type of insurance is pretty much useless.

Life Insurance For Children

Life insurance is designed to compensate lost income as a result of a death. Since children don’t have any income, the small amount of money this type of policy offers parents will be of little help to them.

Shop Around For The Best Insurance Policy

Since there are lots of different companies trying to sell you insurance, it’s always a good idea to hunt around for the best price before signing up with any policy.

In order to avoid wasting money on insurance you don’t need, follow the advice given in the past few articles and only insure the most valuable things in your life, and not every little thing you buy.

Reducing Insurance Cost With Deductibles

One way to get a cheaper insurance policy is to get the highest deductible you can afford.

This is simply the amount you must pay on any insurance claim you make, and what’s left over the insurance company will pay.

The advantage of having a higher deductible is that your premiums (the amount you are required to pay each month or year for your insurance policy) will be lower than if you had a low or no deductible on your policy.

Having higher deductibles means you are less likely to file an insurance claim, which over time will result in fewer claims on your behalf.

The advantage of making fewer insurance claims is that your premiums will remain low, whereas if you were to make frequent claims (because you had a low deductible) the insurance company will eventually increase your premiums.

For example, lets suppose you had a deductible of £100 on your insurance policy. Something gets damaged in your home, and it will cost you £150 to repair it.

So you file an insurance claim, and the insurance company pays you £50 towards the cost of the repairs.

If you filed this sort of claim once a year, there would be no problem. However because your deductible is low you are much more likely to file a claim for anything else that needs repairing.

As a result, your insurance premium will eventually go up and you will be paying a lot more than if you had chosen a policy with a higher deductible.

Let’s now suppose that you had an insurance policy with a deductable of £300. The item that you recently broke is going to cost you £150 to repair, but since your deductable is £300, you will have to pay the entire cost yourself.

As a result, the amount of claims you make to your insurance company are going to be relatively few in comparison to if you had a lower deductible. The repairs you do claim will also be for very expensive repairs.

Since you are making fewer claims to the insurance company, your premium will be kept low and in the long run you will save money.

So whenever possible, get an insurance policy with the highest deductable you can afford because it will save you money in the long run.