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5 important mistakes to avoid when buying health insurance NEW

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7 TYPES OF INSURANCE TO AVOID
1. SERVICE CONTRACTS- The vast majority of service contracts, (also called extended warranties), are just promises by the manufacturer to repair, or pay for required repairs, on their products. The problem is that these contracts usually duplicate what is already stipulated in the basic warranty that already comes with the product that is being purchased. Therefore, the consumer ends up paying twice for the same coverage. We recommend that you compare the wording of the service contract with the standard warranty, and then decide. We find that service contracts can, however, be smart to buy when the standard warranty has run out, but only then.

2. FLIGHT INSURANCE- Although the premiums are relatively inexpensive, these are huge sources of profit for the insurance companies that issue them. For the consumer, however, they do not make a lot of sense. Consider that recent statistics have shown that one could fly on a major airline every single day for a total of 26,000 years before they would be a victim of a crash, and even then, these same statistics point to a probable survival from the crash. Therefore, the insurance is a waste of money.
Even worse, many consumers already have this coverage and don’t even know it.
If you charge the purchase of the tickets through a credit card, as most do, many credit card companies automatically provide $ 100,000 in coverage for the flight.


3. CREDIT INSURANCE-This type of coverage will pay off the balance of the outstanding loans that you might have through your lender, if you pass away. However, most people already have enough life insurance to pay off these debts in the event of their death. If not, a simple term life insurance policy will provide much higher death benefits for a much lower premium amount, when compared to the average credit insurance policy. Again, these are huge money-makers for the insurance companies, but not very smart purchases but the consumer. Unfortunately, due to the high profit potential, many lenders use aggressive marketing techniques on their clients, often resulting in high pressure tactics that lead many borrowers to believe that this insurance is required when a loan is approved. In reality, a lender can not force you to buy this type of coverage.

4. “CASH VALUE” LIFE INSURANCE (FOR SHORT TERM NEEDS)-Also, known as universal or whole life, these policies actually offer a combination of death benefit and savings plan. However, according to recent studies by the Consumer Federation of America, this type of insurance policy produces negative returns for the first five years, since the issuing company takes a large percentage of the premiums paid in the first few years to pay the selling agent’s commission, as well as their own costs. Therefore, these plans only make sense if they are held for many years, and are a terrible investment if “cashed in” or voided early on. Actually, the best value for your life insurance dollar is found in term life insurance, which provides only the death benefit, at a fraction of the cost commonly found with cash value policies. If one were to invest, on their own, the money that is normally placed in the savings account within the typical cash value plan, the returns over time are usually dramatically higher than the returns paid by the insurance company. Thus, these term life plans usually make better sense over long periods of time, as well as short.

5. LIFE INSURANCE FOR CHILDREN-Often presented as a savings plan to fund a child’s college education, these plans are actually a horrible way to pay for college. The problem is that they only pay out if the child were to pass away, thus voiding the need for the savings. If one expects to use the accumulated savings in a cash value type of plan to pay for college, it results in a very disappointing return since the first few years of earnings are eaten up by the high costs hidden inside the policy.

6. MORTGAGE INSURANCE-These policies pay off the balance of your mortgage if you die or become disabled. However, they are not a good investment, since one can simply increase the amount of their current life insurance to accomplish the same goal, but at a much lower cost than a new policy. If you do not have any type of life insurance yet, a term policy provides much cheaper coverage, and the death benefit can be used to pay off the mortgage, and provide for many other needs as well.


7. CANCER INSURANCE-There are many flaws with this type of policy. First, the coverage often excludes skin cancer, which is the most common type of cancer today. Second, in many plans the company will not pay for the costs of the cancer treatments until several years after disease was detected. Third, coverage of this type, which is limited to a specific disease, is a terrible investment when compared to the average health insurance plan, which also covers it. Again, these types of plans generate huge profits for the insurance companies that issue them, but are not smart investments for the consumer.