Getting a life insurance policy is a very good practice, and can be a safeguard to your family and dependents if one were to lose their life and be unable to provide for them any longer. However, there is the chance of over insuring oneself, and losing money. For example, taking a life insurance for a child below the age of 18 does not make sense. They neither have dependents and their risk of loss of life is also very low. Instead, the money that would have been used to pay life insurance premiums can be channeled towards an educational policy, giving them a good amount for higher studies when they need it later.
Some people believe in natural disaster protection and insure their homes and lives specifically against this eventuality. The only people this product is advisable for are those living in areas known to be prone to a certain type of calamity like earthquakes or floods. Home owners also invest in mortgage insurance; in this the insurance company promises to cover the remaining amount of one’s home mortgage payments in case they die. The potential policy holder should check if this is really more cost effective than getting a life insurance policy instead; this is a more appropriate product in this case. Frequent travelers consider flight insurance. The variant of this applicable to lost baggage is recommended, but the variant for covering death or injury in the case of a plane accident is an overhead as a life insurance policy is doing the same job.
The warranty given by manufacturers for general products sold is a type of insurance. A certain term of warranty comes by default with the product, reflecting its high quality to the consumer. However, they also offer the option of extended warranty to the buyer, which is optional and has a separate charge. One should carefully calculate the probability of the product or appliance getting spoiled and the cost of its repair or parts replacement, before investing in extended warranty.
As a take home point, Your Personal Financial Mentor urges you to spend on high insurance premiums of the various types mentioned in this article only if this money seems worth the risk that is being covered. You may want to provide insurance to loved ones or as a gift to family and friends, but exercise this product with caution, lest it becomes more of a liability.
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