Given the sheer number of choices these days in different types of insurance coverage, it would be easy to go overboard. The trick to determining whether a particular policy is right for you is to asses your risk, estimate you potential loss, and then decide if the cost of the insurance to cover that loss is worth it.
This wisdom from a member of the Armchair Millionaire community sums it up nicely:
&194;“Insurance is supposed to protect me from catastrophic financial loss. I evaluate insurance similarly to the way insurance companies do: I make a judgment about how likely an event will occur, the financial impact of that occurrence, and whether or not I can afford that impact. Then I determine if the insurance offered provides a good value for the coverage. That is why I never take out credit card, travel or pet insurance; I don&39;t see these types of insurance as being beneficial. Other, more comprehensive forms of insurance are available that do a better job of coverage. However, when I travel overseas I will take out a health insurance policy in that country, since many American policies are not honored there.&194;” --Ray
You can buy insurance for virtually any kind of risk, including such things as the loss of your prized taxidermy collection or alien abduction (seriously). However, you&194;’re likely to be more interested in the less-offbeat types of policies out there. My guide provides the basics on what&194;’s worth it and what&194;’s not.
The Armchair Millionaire&194;’s Guide to Specialty Insurance
Mortgage protection insurance. Distinct from the private mortgage insurance (PMI) required by many lenders, this type of insurance pays off your mortgage if you die. That makes it exactly like life insurance, but more expensive. The verdict Skip it and get life insurance instead.
Pet insurance. As medical treatment for animals has become more sophisticated in recent years, the cost has gone up, too. Pet insurance will take the sting out of a large veterinary bill, but is not inexpensive. The cheapest policies run about $10 per month, but more comprehensive policies can range up to $50 a month or more. That means that you could easily spend $4,000-$5,000 on premiums over the life of your pet. The verdict Consider it, especially if your pet is younger, when policies are cheaper.
Travel insurance. Travel insurance pays for the many ills that can befall you while traveling, like losing your luggage, crashing your rental car, getting sick, having your travel provider go bankrupt, or even having to cancel your trip before it begins. It can be a good value, especially if you are traveling abroad (where your regular health insurance may not cover you). However, if you purchase travel services with a credit card, your credit card company may already extend some of these coverages. The verdict Consider it, especially if you&194;’re traveling overseas.
Credit card insurance. This insurance pays either the balance or the minimum payments on your credit card should you become sick or disabled, lose your job or die. It&194;’s generally very expensive for the benefit you could receive, and can be redundant if you already carry disability and life insurance. The verdict Skip it.
Special event insurance. With people shelling out more and more for events like weddings, bar mitzvahs and anniversary parties, there&194;’s greater interest in insuring against postponement, inclement weather, sudden illness, lawsuits or any of the other myriad of pitfalls inherent in hosting a large celebration. The verdict Consider it, especially if you have an outdoor venue where weather can come into play.
The Bottom Line: Specialty insurance can be worthwhile in certain situations, but don&194;’t go out and drop big bucks on a policy that may not really pay in the long run. Evaluate carefully before you proceed.
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Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff&39;s newest report, "How to Know When You Are Rich," is now available at http://www.armchairmillionaire.com.
Contact Information:
Lewis Schiff
Armchair Millionaire
877-833-2823
http://www.armchairmillionaire.com
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