5 Insurance Policies You Probably Won’t Need

Everybody needs insurance, but which policies payoff, and which ones can you live without? Here are five insurance policies you may want to think twice about.

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1. Accidental Death Insurance

Most people are covered for accidents involving death or dismemberment by an employer's insurance program, a provincial workers' compensation program or the death benefits of their auto insurance. As a rider or a separate policy, accidental death insurance "plays on the emotions of buyers," says Edmonton-based financial blogger Tom Drake, and isn't the best strategy. Even though adding $100,000 in accidental death and dismemberment coverage could cost as little as $10 a month, you're better off putting that $120 or more a year towards additional life insurance (assuming you qualify). After all, whether you die by accident or natural causes, it doesn't change the amount of income that needs to be replaced through insurance.

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2. Collision and Comprehensive Coverage for Old Cars

Collision covers replacement and repairs after a car accident, while comprehensive covers events such as fire, theft, vandalism and falling objects. You are legally required to have liability insurance in case of a crash, but there's often no need to get "C&C" coverage for a car with a very low book value, says Millie Gormely, a certified financial planner in Thunder Bay, and former insurance claims adjuster. "With an old beater, you may be less likely to get minor or cosmetic damage fixed, and may not want to have a claim on your insurance record," Gormely says. She notes that there are also limits as to what an insurer will pay on C&C claims, based on the vehicle's value. Her advice: Decline any C&C coverage that costs more than ten percent of the car's value.

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3. Credit Card Balance Protection

Many companies offer insurance that will cover your minimum credit-card payment in case of disability or unemployment. But this coverage typically costs around $1 per $100 owing on your card-and that adds up. "You have to pay off your balance before you get your statement with many of these policies, otherwise they charge you on a pro rata basis," says Preet Banerjee of Toronto, a money expert with the W Network and a financial writer. So if you charge $1,000 during the month and pay off everything immediately after getting your statement, you would still have to pay the insurance premium. If you constantly carry a balance of $2,500, you'll pay an additional $25 a month, on top of the interest charged by your credit card company.

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4. Mortgage Life Insurance

Mortgage Life insurance is basically life insurance meant to pay off a home if the mortgage holder dies. Realize three things:

> The money goes to the mortgage lender, not your family.

> Mortgage life insurance can cost far more than regular life insurance. For instance, for a 40-year-old nonsmoker, the premiums for mortgage life insurance on a $100,000 mortgage may be 50 percent more than those for $100,000 in ten-year term life insurance.

> Mortgage life premiums remain constant through the life of your mortgage, even though the balance owed the lender is constantly declining. You may be better off simply getting additional life insurance if you want to ensure that you have enough to cover your mortgage debt in case of death. The caveat: This is assuming that you qualify for insurance. Mortgage insurance may not be preferable to your own private coverage, but it is certainly better than no coverage at all in the event you are medically unable to obtain regular life insurance.

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5. Disability Insurance

To help you in periods of serious health problems, disability insurance (DI) and critical illness insurance (CI) can both play a role. Just be aware of possible limitations of DI and the advantages of the lesser-known CI. DI replaces part of your income if you can't work due to illness or injury. That can be valuable, but you need to clarify the nature of the policy, says Sally Praskey, co-author of What Canadians Really Need to Know Before Buying Insurance. Does the policy pay off if you can't perform your current job or any job? How soon can you collect benefits? For how long? Policies (and premium costs) differ. For some people, says Praskey, CI may be a better fit. These policies cover many major illnesses, but aren't about your ability to work. Instead, they pay a lump sum upon diagnosis that you can use as you wish-pay bills if you want to take time off, cover medical treatment or take a dream vacation. "As a three-time cancer survivor," Praskey says, "I wish I had had critical illness insurance."