Insurance You Can Afford To Avoid
Setting up a life insurance policy is an essential component of your overall personal finance plan
, especially when you have children that are dependent upon your income for survival. There is no excuse not to have simple, basic, term life insurance to protect your family. It is cheap. It is the responsible thing to do.God forbid something happens to you, don't you want your loved ones to be financially protected after your income goes away? However, there are some well marketed variations of life insurance that you can afford to skip.
Why You Can Skip Credit Life Insurance
Insurance companies may try to sell you mortgage insurance or credit life insurance. Some policies cover only life, some cover only disabilities, and others cover both. If you die before the loan is fully repaid, the policy pays the lender an amount equal to what you still owe at that time. This sounds great, but there is a better option.
The good news is you can skip the mortgage insurance or credit life insurance if you qualify for a regular term life insurance policy. Credit life insurance can cost $5 to $7 per year for every $1,000 in benefits while term life insurance costs less for most people. For that same $5 to $7 per month you can get $100,000 in coverage or more.
Term Life Insurance Gives Heirs More Control
In addition to saving you money, term life insurance gives your heirs more control. They will have the flexibility to use the money for their most critical needs rather than being pigeon holed into using the insurance proceeds to pay off a specific loan, especially a low priority one that may be locked at a low interest rate.
Term life insurance is inexpensive and the prices have drifted lower in recent years. Even if you have a traditional term life policy, you could save money by switching to a new policy. You could pay less for a new policy even though you are older.
Other Types Of Protection Lenders Offer
Credit protection and borrowers protection plans can be cross sold on top of a car loan, credit card or even a mortgage or home equity loan. They are kind of like insurance, but not exactly. For example one type of borrowers protection lets you cancel up to six months of mortgage principal and interest payments if you experience financial hardship due to involuntary unemployment, disability, hospitalization or loss of life.
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