March 1, 2008
Are You Overinsured?
Obtaining the right insurance is vital to your financial security. Having life, health, disability, and long-term care insurance can help you through tough times, but you don’t want to overdo it. “You want to look at how much the insurance costs and what you’re going to get back under what circumstances,” says Jeanne Salvatore, spokeswoman for the Insurance Information Institute. “Then you want to see whether it’s duplicative of anything else you might have.” Here are some specialty policies you might want to think twice about before opening up your wallet:
Specific Disease or Health Condition Insurance:
What it covers: Cancer insurance policies, as well as those for conditions such as strokes or heart attacks, generally pay a cash benefit to policyholders who purchased the insurance before being diagnosed with an illness or suffering a health emergency. A holder of a stroke policy may be entitled to a $50,000 payout, says Lee V. Bethel, president of Virginia-based Comprehensive Benefit Services Inc.
What to consider: This policy may not cover certain types of expenses, such as home care, and may have restrictions such as a waiting period before benefits kick in. Furthermore, policyholders won’t receive coverage for the condition if it was diagnosed before the policy was purchased. It’s more important to make sure you have the best health insurance policy you can afford, according to the National Association of Insurance Commissioners, although some high-risk consumers might benefit from the peace of mind this coverage may provide
What it covers: Policies typically cover one or more of the following: trip cancellation reimbursement, baggage or personal belongings, emergency medical assistance, and accidental death.
What to consider: It may make sense to purchase travel insurance if you’ve planned an expensive vacation or if your trip carries a greater risk of injury than normal. It might also be worth considering if you’re headed to an area that’s prone to natural disasters, because this insurance typically provides assistance in the event of a hurricane or other weather-related delays. But “if you’re going on vacation in an area not known for disasters and you’re paying with frequent flier miles for your airfare, and your hotel has a 24-hour cancellation policy,” there’s little risk, Salvatore says. Moreover, some of the benefits offered by such policies might already be covered by your credit cards or general health insurance policy. There is one caveat: While coverage can be purchased up to the day before your trip, it’s recommended that you purchase coverage at the same time you buy your ticket. This way, you receive additional benefits such as coverage for pre-existing health conditions and
coverage if the airline or tour company suffers financial default or bankruptcy.
What it covers: While credit card agreements generally protect consumers from having to pay for fraudulent charges if their identities are stolen, identity-theft insurance goes the extra mile by giving consumers money to help resolve financial difficulties resulting from the theft. “It pays for two things,” Salvatore says. “It helps you with assistance in resolving the problem