Oct
10
2008
Types of Insurance to Avoid
Author: Byron UdellLast week, I spoke to a reporter from SmartMoney Magazine. She’s doing an article on types of insurance to avoid. It got me thinking…here are some definite types of life insurance I would avoid and reasons why I’d avoid them:
o Mortgage Life Insurance – Mortgage life insurance is a no brainer. If you need life insurance to protect your family from the mortgage payment then chances are you’d want your family to also be protected financially. Mortgage life insurance only covers the mortgage and it decreases as your mortgage is paid down. So, in effect, your life insurance premiums become more expensive as the mortgage is paid down because you would receive less death benefit. Whereas a level term life insurance policy premiums remain level and the death benefit also remains the same for the length of the term.
o Accidental Death – If you are thinking of buying an accidental death benefit, then chances are you’d want to protect your family no matter how you died. Right? The only time I’d recommend an accidental death benefit is if you are “uninsurable”. In this case I’d recommend you purchase an accidental death policy, especially if you’re younger, because the chance of death by accident is greater.
o Child Life – Buying your child a life insurance policy is a personal decision. My recommendation is make sure you have enough life insurance on yourself before you consider buying a policy on your child’s life. Some agents will tout future insurability. And while this can be true, most of the time your child will grow into a health adult that will still be able to qualify for the best rates at 25 or even older.
October 11th, 2008 at 10:11 am
I definitely agree with you about mortgage life insurance. The consumer may be best served by buying level term life insurance, because the rates are guaranteed to remain the same each year for up to 30 years, and the coverage amount stays level as well. With decreasing term insurance the rates remain level, but the coverage amount declines each year, so your beneficiary may receive a lower amount of death benefits.