Myths and Mistakes Part 2

From Insurance for Dummies by Jack Hungelmann

Mistake: Buying your life insurance in pieces

Buying your life insurance in pieces is a lot more expensive than covering all your needs in one policy. Plus, buying in pieces leaves you vulnerable to a gap in your coverage. Examples of piecemeal buying are having mortgage insurance through your lending institution, credit card insurance through your credit card company, credit life insurance with your car loan, supplemental group life insurance at work, flight insurance at the airport, and so on. With some of these insurances, you don’t have to qualify medically; therefore, if you’re in poor health or near death, buy all you can. Otherwise, they’re often three or four times the price of what you would pay if you’re in good health.

Besides the higher prices, the other concern I have about buying life insurance in pieces is that you take care of only part of the risk, leaving a lot of needs unprotected. Using the piecemeal approach, you could buy a little grocery life insurance so that when you die, your family’s groceries will be paid for. ( The supermarket could offer it at the checkout.) Or insurance on your utility bills. If you die or become disabled, your survivors wouldn’t have to pay utilities for a year or two.
When buying life insurance, figure out how much insurance you need to do the whole job and buy one policy.

Mistake: Buying accidental death/travel accident coverage

Both accidental death and travel accident policies are varieties of Las Vegas insurance, transferring only the accidental portion of your risk. In other words, you have no coverage for death from natural causes. Buying these policies is an especially bad move if you buy them in lieu of the full life insurance you really need. My belief about travel accident coverage is that anyone who buys it at the airport or from a travel agent is really saying, “I’m not comfortable with the amount of life insurance I have.” The bottom line is that if you need insurance to cover a flight you’re taking, you also need it for driving down the street, potential heart attacks, and the like.

When buying life insurance, buy only coverage that pays for any death — natural or accidental.