We buy auto and health insurance without thinking twice, but what about more exotic policies that insure everything from marriage to pets to travel? Consumers are usually much less familiar with these options, which makes them difficult to evaluate. In general, such elective insurance policies are expensive, since they insure a relatively small pool of people who are at high risk of needing to rely on them.
We evaluated four optional insurance programs in order to answer the question: Should you insure yourself against these risks?
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Marriage insurance. This type of policy isn't yet available, but at least one company, Safeguard Guaranty Corp., expects to start offering it early next year. The details are being worked out, but Chief Executive John Logan says the company will sell policies that pay out in the event of a divorce as well as in the event of a long-lasting marriage, which he says will provide a financial incentive for people to stay married. "It's really designed for people who plan to stay married forever," he says. But because divorce can be so financially devastating, the insurance is designed to ease that transition, too.
Here's how it works: Individuals will be able to purchase the lowest-cost policy for about $1 per day. The divorce benefit increases over time, so people who stay married longer and then divorce receive more than those who divorce after shorter periods. For a typical policy with a $100,000 face value, after five years, the payout if the couple divorces is $12,500, and after 24 years the payout is $64,500. But if the couple stays married and celebrates their 25th wedding anniversary, they'll receive the full $100,000. Logan says the company will make money from clients' premiums and from customers who buy policies and end up canceling.
Safeguard Guaranty may face competition in this new field. Olu O. Eniwaye, professor of human services at Daytona State College, is also speaking with insurance companies about his own marriage insurance concept. "People making movies have insurance for everything, [for example] for their voice, so I thought, 'There should be something for marriage,' " he says. While he says he has many details to work out, Eniwaye wants the insurance to encourage counseling and offer a payout for divorce only as a last resort.
Salary-gap insurance. Unlike unemployment insurance, which pays people who are temporarily out of work, salary-gap insurance would make up the difference in income for employees who are forced to take lower-paying work after losing a job. Bill Graham, the entrepreneur behind this idea, is working with insurers with the hopes of offering the product in the United States later this year. (He has already found an insurer to make such policies available in Holland.) He estimates that the premium would be about 1 percent of a customer's annual salary and the payout would make up 50 percent of the difference between the old and new salary for six months to two years, depending on which plan was purchased.
While some fields face higher rates of unemployment than others, Graham says that as of now, the rates won't differ based on profession. That means the policies could be a better deal for those facing a high risk of losing their job and needing to accept a lower-paying one.
Pet insurance. According to the American Pet Products Association, 62 percent of American families own a pet. Those furry friends tend to come with increasingly high vet bills, which lead some people to take out pet health insurance. The association estimates that Americans will spend about $12.2 billion at vets' offices this year. Treatments include cancer surgery, antianxiety drugs, and even organ transplants.
But pet health insurance doesn't come cheaply. It usually starts at about a couple of hundred dollars a year for limited coverage. Spayed and neutered pets usually receive lower rates, but older pets may not be eligible for illness insurance. Pet owners willing to spend thousands of dollars if Bubbles comes down with a fatal disease should consider taking out the policy; otherwise, it probably makes sense to save the money instead and prepare to say goodbye if a serious illness strikes.
Travel insurance. When you plan a trip through a travel agency or Web site, you are often asked if you want to add travel insurance that will cover your losses if something goes wrong. Travel expert Peter Greenberg says that such policies can add up to 10 percent to the cost of your trip. The most common type of travel insurance reimburses you for canceled or interrupted trips. Greenberg recommends it for expensive vacations but says the extra cost isn't worth it for short getaways. He suggests carefully comparing travel insurance policies so you know exactly what you're paying for; sometimes, exclusions include adventure travel or interruptions from acts of war.