Dave Ramsey Recommends Avoiding These Unnecessary Insurance Costs
- Buying insurance protects a person's loved ones and their assets.
- It's important not to incur unnecessary insurance costs while putting coverage in place.
- Finance guru Dave Ramsey has tips on unnecessary expenditures to avoid when buying insurance.
Should insurance buyers heed Ramsey's advice?
Insurance is something everyone should have. Various types of insurance, including home or renter's insurance, auto insurance, and life insurance, can provide crucial protection for a policyholder's assets. Coverage can also protect the policyholder and their loved ones and ensure their financial security even if disaster strikes.
Since insurance policies should be in effect throughout a person's lifetime, the costs of coverage can add up over time. That's why it's so important to avoid mistakes that make insurance even more expensive.
Fortunately, finance guru Dave Ramsey has identified some unnecessary insurance costs to avoid. Those buying coverage can consider his guidance and make informed choices about whether a type of insurance protection is actually needed or is a waste of money.
The hidden insurance costs Dave Ramsey warns about
Ramsey identified seven "hidden" insurance costs that most people don’t need to pay. They include the following:
1. Added costs for paying monthly
Many insurers charge less if policyholder's pay annually, or once every six months, rather than paying premiums on a monthly basis. If it's possible, there's no reason not to take advantage of the savings that comes from making larger payments less often as this can be more convenient as well as cheaper.
2. Fees for paper payments
Ramsey warns that many insurers charge to send statements in the mail. In this digital age, there's no reason not to sign up for paperless statements if doing so comes with a discount.
3. Rental car reimbursement coverage
Ramsey points out that many people don't need this protection if they have a second car or an emergency fund. However, auto insurers often include it, which adds to premium costs.
4. Roadside assistance
Auto insurers may also offer roadside assistance for an added fee. However, Ramsey says this is unnecessary for those who already have AAA or roadside assistance from another source, such as their car dealer.
5. Return of premium coverage
Some life insurance policies provide a rider that allows those who pay for term life insurance to get back premiums paid if they don't die during the coverage term. The reason for this is that term life policies are in effect just for a limited time, and no death benefit is paid if the policyholder doesn't pass while the coverage is in place. But Ramsey says these riders are generally expensive and most people would be better off investing or saving the money they'd spend on them.
6. Accidental death riders
This is another life insurance add-on. It allows a policy to pay more if a death occurs due to an accident instead of natural causes. Ramsey says paying for this rider isn't needed because people should buy enough insurance to care for their family and there's no reason survivors would need extra coverage just because of how the death happened.
7. Extended warranty coverage
These warranties are often more expensive than they are worth, and Ramsey says it would be better to simply save the money to pay for any repairs that might arise.
Bonus Tip: Overpaying for insurance
Finally, Ramsey says consumers could end up overpaying for coverage if they don't get insurance quotes regularly and compare costs.
Should consumers listen to Ramsey's advice?
Most of this advice is sound, especially as there's no reason to pay more just for a paper statement or to make less frequent payments. Ramsey is also right that many of the insurance riders aren't worth the cost, and it's important to get quotes. When it comes to rental car reimbursement, though, those who rely on their vehicles will often find it's not a waste of money to ensure they'll have a car to drive if an accident occurs.
So, it's worth taking Ramsey's tips into account, but each person should ultimately review their own coverage needs carefully to decide what kinds of protection are right for them.
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