What Types Of Insurance Should You Avoid At All Costs?
Not all insurance policies are created equal. Some might be money eaters, others simply might not give you useful coverage that is applicable to your situation. If you’re buying personal or commercial insurance, here are the types of insurance that you should try to avoid.
1. Extended warranties
We’ve all heard it before—a phone call asking you if you’d like to extend your warranty. Warranties are extremely common, offered by all sorts of household appliances and brand name products. The world of warranties is as wide as you can imagine.
However, extended warranties truly aren’t useful most of the time. They can’t even sit there to collect dust or look pretty, they’re just an expense that is unnecessary most of the time. This is because extended warranties aren’t likely to pay off. So the next time you hear about an extended warranty deal, maybe reconsider.
2. Rental car insurance
Of course if you rent cars very often, a rental car insurance policy can make driving rented cars a more protected experience. However, for most people, rental car insurance is an auto insurance policy that just wastes money.
Even though rental car insurance seems to be very cheap compared to other kinds of coverage, if you don’t anticipate renting cars, it is probably better to just drop rental car insurance altogether. Plus, many rental car insurance companies offer financial protection options you can buy instead.
Also Read: Can You Rent A Car Without Insurance
3. Flight insurance
The media and cinema make aviation look like a terribly dramatic and risky mode of transport. The truth is, flying on commercial airplanes is generally the safest mode of travel, with incredibly low accident rates.
If you’re still thinking about getting flight insurance, that means you might have fears of a crash, and want the financial protection for your loved ones just in case. If that is true, you might want to consider buying life insurance instead. The benefits can be helpful, meaningful, and more applicable to broad situations, as opposed to flight insurance which is really only for aviation.
4. Water line coverage
There has been quite a push towards selling water line coverage. Water lines run from the street to houses, and water companies encourage property owners to purchase additional water line coverage.
Chances are, your water line won’t get damaged. It’s a very rare occurrence for newer houses to get damages that need repairs to the water line.
In addition, the truth is that many insurance policies that are related to utilities are just not worth the money. Even if your water line did get damaged, the repair costs may not be expensive enough to warrant you paying a premium for water line insurance over time.
5. Life insurance for children
Yes, children life insurance is indeed a thing. It is purchased by families that want some kind of safety net for their children, heirs, and/or dependents.
However, it is often not a financially advantageous option to buy life insurance for children. This is because children are statistically likely to grow up safely. Purchasing life insurance for children will just end up being a waste. On the other hand, if a parent or guardian opts for something like a college fund or individual retirement plan, there will be long term benefits to the recurring payments.
6. Flood insurance
Flood insurance is actually essential if you live in a flood zone, like along coasts or in Florida. However, if you’ve never seen a flood in your life, if your surroundings have not seen a flood from natural causes in ages (if ever)… then flood insurance will probably be superfluous.
This is because it is fairly unnecessary that your home will be the first one to flood in a location if it’s never flooded before.
Also Read: Do I Need Flood Insurance? 5 Reasons
7. Credit card loss insurance
In this day and age, it’s very common to use credit cards for all sorts of payments. Many people might worry, what do you have to pay if you lose your credit card somehow? What if a thief used your credit card to pay for exorbitant amounts of goods?
Federal law actually limits your liability if your credit card were stolen, which is why credit card loss insurance isn’t actually that important to have. If you’re worried the out of pocket costs you’d have to pay (up to $50), you probably shouldn’t be paying for the ongoing premium that the insurance would require you to pay each billing cycle.
8. Unemployment insurance
Unemployment insurance is actually quite an attractive coverage option, in theory. It’s meant to pay your bills for you while you are unemployed.
In practice, it’s often not as useful as it claims to be. If you are unemployed, you might find it difficult to pay the premium of the unemployment insurance policy.
Rather than buying unemployment insurance in case you lose your job, many people opt to save money by putting small amounts into an emergency fund each month.
9. Disease insurance
Many people who consider getting disease insurance might want to look into getting a better medical coverage insurance policy instead. The benefit of disease insurance is that it will probably cover a more specific disease that you might worry about, such as heart issues or cancer. However, the benefits may not be worth it, since you also could just buy medical insurance that provides coverage for a wide variety of diseases.
10. Accidental death insurance
By now, you might’ve noticed that there are plenty of insurance types that prey on the idea of “just in case”, even if the situation where you’ll get a payout is exceedingly rare.
Accidental death insurance is one of those coverage types. If you are worried about a catastrophe, it often makes more sense to just get life insurance, which is usually easier to get an insurance claim payout for. Accidental death policies may be more likely to challenge claims and have numerous stipulations preventing you from benefiting from the insurance in the first place.
11. Mortgage life insurance
This might sound confusing, but mortgage life insurance is essentially a very specific kind of life insurance. The policy pays off your mortgage in case of the policyholder’s untimely death.
However, it is such an incredibly specific coverage option that for many people, it makes more sense to invest in a term-life insurance policy. Any death benefits should be able to cover the mortgage in a similar manner, depending on the policy.
12. Car insurance add-ons
When shopping for auto insurance, it’s easy to get dizzy with all the add-ons that auto insurance companies offer. That’s why it’s a good idea to at least be conservative and cautious when it comes to personalizing your auto insurance.
13. Cell phone insurance
So you usually don’t need to extend a warranty for your phone. Do you need cell phone insurance instead? The answer for most people is no.
Cell phone insurance policies are often disappointing even when your phone does break and need to be replaced. Cellular technology becomes obsolete extremely quickly, with big name brands creating new phones nearly every single year. It might be better to just stick with your warranty and not bother with this kind of insurance.
14. Disability insurance once you are older
Disability insurance itself is a wise option for many workers who might worry about getting disabled and being unable to make money. However, if you are already in your sixties, disability insurance benefits might not be worth it based on the way disability insurance policies work.
15. Final expense coverage
The final type of insurance to avoid is final expense insurance, though with some caveats. If you have plenty of outstanding debt and don’t want loved ones to worry about it after you pass, it could be helpful. However, for many people, it is more beneficial to simply purchase some kind of life insurance.
Why Should You Avoid Certain Types Of Insurance
In general, insurances that cover extremely niche situations should be avoided. For example, flight insurance doesn’t make much financial sense when an airplane crashing is such a statistically rare phenomenon.
Insurance companies know how to advertise their products, even if the products aren’t so useful. If it’s an add-on to your insurance policy that sounds nice but you don’t actually need, be wary of adding anything to your already fitting policy.
What Types Of Insurance Should You Never Be Without?
Many experts recommend the average person to buy:
- Health insurance
- Long term disability insurance
- Life insurance
- Auto insurance
Arguably, health insurance is the most important because of how necessary it is to life.
If you’re a professional worker or business owner, you should also consider commercial and liability insurance options.
What Is The Riskiest Type Of Life Insurance?
If you live a risky lifestyle and want life insurance, you would likely need the assistance of an agent to help you procure a high-risk life insurance policy. It can be hard to find the insurance coverage that suits your need, but may very well be worth it.
Do Insurance Companies Try To Trick You?
In a certain sense of the word “trick”, it is possible that insurance companies try to mislead you into buying products you might not need.
They aren’t lying when they say that that you could, in some situation, need an extended warranty or water line insurance. But that situation is often not likely enough to be worth the premium you’d need to pay over time.
Sometimes (but not always), the insurance company doesn’t have your best interests in mind.
If you’re trying to find good coverage with competitive pricing, reach out to our professionals at Worth Insurance. We can help you with your insurance shopping needs by providing you with quick quotes, personalized policies, and more.