The main reason behind buying a life insurance policy is to protect your family or dependents from financial hardships in case something happened to you unexpectedly. But, there are a lot of life insurance policies that are being sold today that duplicate the protection you would get from a normal term life insurance policy, so don’t be so quick to sign on the dotted line. Here are some types of insurance you should avoid:
Credit Life Insurance – A credit life insurance policy, or “credit life,” as it is also referred to, is used to pay off a debt for a car, electronics, appliances or any similar consumer items if you die or are disabled and cannot make the repayments. It is in effect a type of decreasing term life insurance that will help pay your credit card bill if something were to happen to you. But unlike a term life policy, it is insurance on a debtor, in favor of a lender.
You may be offered a credit life policy when you are financing a large item and the premiums are usually added into the loan contract. This type of policy is ALWAYS optional and is generally quite expensive. Credit life isn’t normally sold by itself. Salespeople typically sneak it in when you finance a purchase because it generates hefty commissions for them. You should also know that it is illegal for a lender to force you to buy such a policy when making any big ticket purchases. Credit life coverage is also severely limited as it never covers pre-existing medical conditions. If you turn 70 during the policy period, it also often becomes null and void. Finally, your family isn’t treated as the beneficiary, rather the lender is.
The basic premise of credit life is faulty as what most people don’t realize is that when you die, your dependents are not obligated to pay off your debts unless their names are on the accounts in question along with yours. If you feel that you are being forced to buy credit life insurance against your wishes, scan all agreements carefully in search of signs of credit life and ask that it be removed. If you find out that you are already paying for credit life, you can cancel it at any time and receive a pro-rated refund. You should also check with your state insurance commissioner if a salesperson is allowed to insist you buy credit life to get a loan and complain to the authorities if it is not allowed.
Therefore, if you already own a sufficient amount of life insurance to cover your financial needs, including repayment of your debts, the purchase of credit life insurance should be avoided.
Mortgage Life Insurance – The odds are that you have already been offered a mortgage life insurance if you own a house. Your lender may in fact have recommended such a policy as the premium payments are normally added to your mortgage payments.
Mortgage life insurance also works in the same manner as a decreasing term life insurance policy that will pay off your house if you die. As the amount left to pay on your home decreases and the years pass, your death benefit in turn, decreases. These policies usually have a high cost, which only adds to your premium payment and interest on your mortgage. In addition to this, your lender is the beneficiary in this type of policy and your family will receive none of these death benefits. The bottom line is that any good life insurance policy can serve as mortgage life insurance. It might seem like a good idea to protect your home and take out a mortgage life policy but an affordable term life insurance policy will accomplish the same thing and term life insurance policies are generally less expensive than those offered by mortgage companies.
Air Travel Life Insurance – Air travel life insurance covers a broad range of situations such as lost or delayed luggage, flight cancellation, or even trip delay which can in turn cause other cancellations of hotel rooms or car rentals. Such insurance will cover you if you have a medical emergency before or during your flight as well as during your travel to and from the airport in case an accident occurs at the time. Air travel insurance does not cover accidents that happen while on vacation but only during the flight itself. Air travel life insurance is basically like a short term accidental death life insurance policy. If the plane was to crash and you were killed or injured, your family and dependents would receive compensation through this type of insurance policy. This type of policy however will terminate as soon as the policy holder leaves the airplane. This kind of insurance is only available for commercial flights and is not available for private carriers and has to be purchased prior to departure. At the end of the day, though, if someone depends on you financially, then you need life insurance to cover you no matter how you die. An affordable term life insurance will protect the policy holder if he/she dies in an airplane crash or naturally and more than compensates for the loss of life without any extra expense.
