Avoid the Gimmicks

Rhonda asks what kind of insurance she should avoid. Dave has a list ready for her.

QUESTION: Rhonda on Twitter asks what kind of insurance she should avoid. Dave has a list ready for her.

ANSWER: In the life insurance world, you should only buy term life insurance. Avoid any kind of insurance that has a savings program built into it. That would be whole life, universal life, variable life—they're all crap. Stay away from them.

I don't buy gimmick insurances like double indemnity for accidental death. You're not double dead if you die by accident. You're just dead, and your family needs the same amount of money either way, whether you die by accident or die of a heart attack.

I don't buy cancer insurance. Your health insurance ought to cover cancer insurance. If it doesn't, you have a crummy health insurance policy.

You need good health insurance, good disability insurance—long-term only. I don't buy short-term disability. That's another gimmick, because you need a good emergency fund to take care of that. Get yourself out of debt. Get the emergency fund in place. Quit blowing all of your money on gimmick insurance. Long-term disability is a yes. Of course, homeowner's or renter's insurance is a yes. Long-term care insurance to cover nursing home stays—if you're 60 or older—is a yes. Obviously, term life insurance is a yes. Auto insurance is a yes.

Watch for your gimmick insurance stuff. Another thing to avoid is return of premium. An insurance company charges you a little extra but gives you all of your premiums back if you don't use the insurance. Well, if you'd just invested that little extra you paid, you'd get all your premiums back whether you used the insurance or not. That's a gimmick as well, so I don't do return of premium, either. Don't save money with insurance companies. It's not the way to live.