15 Kinds of Insurance You May Not Need

15 Kinds of Insurance You May Not NeedIt's bad enough that we fork over gobs of money for all kinds of necessities, such as our mortgage payments, groceries, gas, and electricity. But it's a real shame when we fork over dollars needlessly, buying things we don't need -- like many kinds of insurance.

I don't mean to make light of insurance, though. Many forms of it are quite critical. If you own a home, you'd better insure it, lest a fire or some other catastrophe destroy it. Cars need to be insured, too, as does our health. For many of us, life insurance, disability insurance, and long-term care insurance also make a lot of sense. But think twice before opting for the following protections:

1. Life insurance. Keep in mind that life insurance is designed to protect an income stream. If you have children or any other people who depend on the income you provide, then it's a smart purchase. But if you're single with no dependents, you probably don't need it. It's generally silly to buy it for children, too, as no one is depending on their income. And when you buy life insurance, term life is usually a better buy than whole life. It covers you for as long as needed, such as until your children grow up. Whole life costs more and adds an "investment" element that you can improve upon on your own, through other, less-costly investments.

2. Accidental-death insurance. If you're worried about dying prematurely, look into term life insurance, which will kick in whether you die by accident or disease. This insurance is costly, especially considering that deaths from accidents are very unlikely.

3. Mortgage life insurance. If you want to ensure that your mortgage will be paid off if you pass away, consider buying or boosting your regular life insurance. It will cost less, and the money will help your survivors pay for other expenses as well.

4. Private mortgage insurance. This is typically required if you buy a home with a down payment that's less than 20% of the home's value. If you can pull together a 20% down payment, do so to avoid this. If you can't, look into alternatives, such as opting to pay a slightly higher interest rate on your mortgage, or using an "80-10-10" strategy, where you take out a regular mortgage for 80% of the home's value, pay 10% down, and also take out a smaller loan for 10% of the home's value. If you're currently paying PMI, monitor your growing equity in your home and be sure to have it removed once your outstanding loan falls below the 80% mark.

5. Flood insurance. If you live in a region susceptible to flooding, then by all means buy this coverage. But if you don't, save your dollars.

6. Credit card loss-prevention insurance. Instead of forking over as much as $180 per year for this, relax, knowing that by law, your losses due to theft are capped at $50 per card.
7. Credit card insurance. This insurance is designed to pay down your credit card debt if you can't do so. But it's likely to only make minimum required payments, and the company will be trying to avoid doing even that. It's much more effective to just pay down your debt on your own, and to keep it under control.

8. Involuntary-unemployment insurance. With our economy still sputtering, this might appeal to many, as it's designed to make minimum payments on your credit card or auto-loan debt if you lose your job. But the money you spend on this could be better spent simply paying down your debt -- and funding an emergency fund. Most of us should maintain such a fund, with enough moola to cover three to six months (or more) of our expenses. Park the money in CDs or money market funds, or some other easily accessible place.

9. Cancer insurance. If cancer or some other disease strikes you, your existing health-care coverage is likely to cover most medical expenses related to cancer. Read up on the details of your coverage before buying any additional disease-specific insurance. Consider it only if the price is right and it covers more than your current policy.

10. Vehicle-collision insurance. This covers the cost of repairing your car if it's in an accident. If your car is old and you can handle buying a new (or used) car should you have to, you may not want to pay for this coverage.

11. Rental-car insurance. This can seem like a handy add-on to your car-insurance policy, but pause a moment to do some math. If it costs you, say, $50 per year, and you end up needing it for five days over a 10-year span, then you will have spent $500 for something that might really cost you just a fraction of that. You'd do far better to just put $50 in an envelope each year, earmarked for rental expenses.

12. Rental-car damage insurance. The rental agency will explain why this is a smart purchase, but do your homework before arriving at the agency. Your regular car-insurance policy might already cover this cost, and some credit cards might cover it as well.

13. Flight insurance. Dying in a plane crash is extremely unlikely. If you're concerned about premature death, look into term life insurance. If you already have a policy, it may well already be covering you against this remote risk.

14. Extended warranties. In many cases, it's worth resisting the salesperson's recommendation to buy these. Most appliances and electronics will not give you trouble, and if you pay to repair those that do, it may still cost you less than buying lots of extended warranties. Consider it only for big-ticket items, where fixing or replacing would be a major hardship.

15. Identity-theft insurance. Identity theft is a real concern these days, but you still might not need this. Your credit card might offer some identity-theft protection features -- call its customer-service number and ask. You can also monitor your own credit record by requesting copies of your credit report from the three major reporting agencies. By law you're entitled to one free review each year.

Never sign up for insurance without thinking through the alternatives. And read the fine print to see exactly how much coverage is being offered and how good a deal you're being offered.
Do protect yourself, but don't overprotect yourself.
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Longtime Fool contributor Selena Maranjian holds no position in any company mentioned.

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Nina

Great article, here are several tips from me on how to get cheaper car insurance:
- Use insurance comparison sites like: ---EliteCarInsurance.info--- . Once you register you'll get free quotes from a lot of insurance companies.
- Ask for group discount.Get as many insurances as you need from the same company.
- Always stay insured.If you cancel your plan even for several days, some companies may consider you as high risk and you may need to pay more next time.
- Car Security Devices.Any extra security measures you take to deter thieves from stealing your car will further decrease the risks you pose to the insurance company.
- Good driving records.That will definitely lower your price.

---EliteCarInsurance.info---

January 12 2012 at 4:27 AM Report abuse rate up rate down Reply
mjmest

pj512 I agree with you about flood insurance. The problem with flood insurance is that it is cheap if you live in a low risk area, but if you live in an high risk area it is very expensive. But yeah, it is worth every penny even if you don't live in an area prone to flooding, since it covers a critical gap in every homeowners/renters policy.

This is almost like one of those articles where the author suggests places to retire outside the US, which are cheap, but also prone to coup's, and extreme violence.

Like no-duh.. people who have PMI usually could not afford the house in the first place without FHA.. and are stuck paying it. And people who cars old enough that collision insurance is not worth buying typically can't afford it anyway.

And anyone who finances a car has to get it anyway..

November 30 2011 at 3:51 AM Report abuse rate up rate down Reply
mjmest

pj512 I agree with you about flood insurance. The problem with flood insurance is that it is cheap if you live in a low risk area, but if you live in an high risk area it is very expensive. But yeah, it is worth every penny even if you don't live in an area prone to flooding, since it covers a critical gap in every homeowners/renters policy.

This is almost like one of those articles where the author suggests places to retire outside the US, which are cheap, but also prone to coup's, and extreme violence.

Like no-duh.. people who have PMI usually could not afford the house in the first place without FHA.. and are stuck paying it. And people who cars old enough that collision insurance is not worth buying typically can't afford it anyway.

And anyone who finances a car has to get it anyway..

November 30 2011 at 3:51 AM Report abuse rate up rate down Reply
pj512

#5 - Flood insurance. The area I live in flooded two or three years ago. Never had before. Lots and lots of houses and a school were under water for several days. Most of those people did not have flood insurance. Most of them had to walk away from their homes. The county bought several and tore them down. I added flood insurance for about $120 a year. Peace of mind.

Rental insurance on your policy - I pay about $24 a year for that coverage. I just had a wreck (they are still trying to find out who was at fault), but my insurance company went ahead and let me get a rental car. They paid $16 a day, I had to pay the extra $6. I had the vehicle for 12 days.

Rental car insurance - I would rather pay the rental company for it than have to file a claim on my insurance. $500 deductible and the rates go up.

I agree with just about everything else.

November 29 2011 at 9:46 PM Report abuse rate up rate down Reply
pmarsh25

Rental car companies are vultures on this -- I often get asked "do you want the premium insurance or just the basic coverage", when in fact, I need neither (AMEX card plus covered on my regular car insurance) and tell them no. My father broke his hip a few years ago while on a golfing trip in SC, and my naive mother went down to help -- these scumballs had her sign up for a $1950 car (with every "extra" insurance/other option) for a three week rental... I found out and got involved and got it reduced to aroound $700. Shame on them for taking advantage of an 80 year old woman in distress...

November 29 2011 at 7:31 PM Report abuse rate up rate down Reply
td145

There is one area that your car insurance will now cover. That is, "out of service coverage" It is a little clause they put in their contracts for their rental cars. Your insurance will cover damage but not for the rental cost that the auto will bring in each day. Just another way the rental companies are "screwing and stealing" the consumer.

November 29 2011 at 6:56 PM Report abuse rate up rate down Reply
knittk

selena you obviously dont do your homework when you write your reports probably trying to make a profit thinking only about yourself -- almost all the insurance plans you wrote about protect the consumers own policy without filing any claims paying any deductibles affecting insurance policys being raised or cancelled and save consumers time and give priceless peace of mind and no hassles --- you should really write reports that help people not that help you meet your deadlines just to help your job !

November 29 2011 at 5:58 PM Report abuse rate up rate down Reply
jrgordon47

Good artical...but I would like to make two points...
Item # 11....The fact that you are renting a vehical means one of two things. 1) your car has been in an accident/stolen or
2) your away from home....either way an accident with a rental car could cost well over the $500 deductible on your policy and you are not in control of the repairs...also many personnal auto insurance policies do not cover rentals or cover them at a higher deductible. Also keep in mind you are not in control of the repairs.

Item # 12....I agree that some cards cover this, if your's does great. But it's still a hassel. Why would you want your own policy to take the hit and up your deductible or worst yet get cancelled.

Remember penny wise pound foolish....

November 29 2011 at 5:40 PM Report abuse rate up rate down Reply
Da Butt :-)

A rental car company tried to charge me for imperceptable hail damage (it did not hail while I had the car). I did not buy their insurance but got out of it by complaining loudly to the BBB. Watch out for this.

November 29 2011 at 5:32 PM Report abuse rate up rate down Reply
jabaileydc

Check with your insurance company prior to any rentals. I drove a Penske truck from coast to coast. The company wanted me to purchase their liability insurance, however when inquiring with my auto insurance agent, I discovered that I would be fully covered for THEIR truck. Saved me some money, indeed!

November 29 2011 at 5:17 PM Report abuse +1 rate up rate down Reply