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Ask Dave

Dave's Thoughts on Supplemental Insurance

Does Dave think supplemental insurance is a good or bad idea?

QUESTION: Michelle on Twitter wants to know what Dave thinks about supplemental insurance like Aflac.

ANSWER: Some supplemental insurance is good, but most of it is not. I don't believe in cancer insurance because your health insurance covers that. I don't believe in short-term disability insurance. You shouldn't pay for that; you should have an emergency fund built up to cover short-term disability. You should do long-term disability insurance.

You should not do accidental death because you are not double-dead if you die by accident. Your family needs the same amount of money to take care of them regardless of how you die. Some of the supplemental insurance is just dinging you at six bucks a month.

Stuff like long-term care insurance if you are over 60 years old or long-term disability insurance can be a very good buy. I'm not anti-Aflac, but they have several products that I would tell you not to do and a couple I would tell you to look at and consider doing and compare them to other people's prices. A lot of those are just gimmicks.

Cancer insurance just plays on the emotions. I have health insurance, and if I get cancer, it covers the cancer. Someone might say that it doesn't cover your income, but if I'm disabled it does because I have disability insurance. If it's a short-term disability, I have an emergency fund to cover it.

If someone says my family can't eat if I have cancer, I say why not? I have an emergency fund, I'm out of debt, and I've got my investments. It's easier to do all that if you're not spending all your money on supplemental insurance.

Be careful that you're not being gimmicked to death with this stuff. Instead, select carefully and think about overall financial planning, not some hype that the guy in the lunchroom from the HR department is doing. Don’t do that because it takes away all your money that you could be doing other stuff with.

You need to self-insure through a lot of that and/or make sure your major insurance areas are covering a lot of that. Get good term life insurance through Zander Insurance for 10 to 12 times your annual income on yourself on a 15- to 20-year term insurance policy. That's life insurance, that’s not supplemental insurance. That's a major category.