10 Insurance Products That Are a Waste of Money

Here are insurance products that are rarely worth paying for, and some better ways of preventing or mitigating losses.


Insurance, at its best, helps protect against events that could send your finances into a death spiral. Crucial products include insurance against a serious car crash, the loss of or damage to a home, and the loss of income due to death or disability.

Other products? Many offer little value, or they’re filled with exclusions and caveats. Following are some potentially dumb insurance buys:

1. Identity theft insurance

Federal law limits your liability from credit card fraud, so even if a thief uses your credit card, you’re off the hook if you report theft promptly. Says the Federal Trade Commission:

Your liability for unauthorized use of your credit card is limited to $50. If you report the loss to the credit card company before your credit card is used, you are not responsible for any unauthorized use.

Most card companies go a step further and offer $0 fraud liability.

Report an ATM card missing within two business days after you realize it’s gone, and you are liable for no more than $50 in stolen money. Wait longer to report and you could be responsible for up to $500 in purchases. If you let 60 days go by after your bank sends a statement with unauthorized purchases, you could face unlimited liability, the FTC says.

In 2014, only 14 percent of identity theft victims paid $1 or more out-of-pocket, says a U.S. Department of Justice report. “Of these victims, about half suffered losses of less than $100,” it says.

Repairing your credit and damage to your identity, on the other hand, can be time-consuming and costly. The National Association of Insurance Commissioners says:

 [I]dentity theft insurance provides coverage for the cost of reclaiming your financial identity, such as the costs of making phone calls, making copies, mailing documents, taking time off from work without pay (lost wages) and hiring an attorney.

Identity theft insurance may cover those costs. Or it may not. Policies vary. Questions to ask: Can you recover lost wages from time away from work? What will the company do to reclaim your identity for you? Read the exclusions, limits and deductibles to decide if a policy is worth it.

Alternative: Protect yourself before you’re hit. Monitor your bank and credit accounts regularly. Get three free annual credit reports. If you think your identity has been compromised, place a 90-day fraud alert on your credit file.

2. Credit life insurance

You may be offered credit life insurance when you obtain a car loan or a mortgage. It pays all or part of your loan balance if you die. The beneficiary is the lender, not your family.

Occasionally, it is built into the loan and can’t be declined. Most often, though, it is a separate and optional purchase. The Federal Trade Commission warns consumers to beware of lenders slipping it into a purchase without asking. That’s illegal.

The FTC advises borrowers to resist lenders’ sales pressure. You can’t be denied credit for declining optional credit insurance. If someone tries, report them to your state attorney general (find yours here) or state insurance commissioner (click your state on the map or select it from the drop-down menu).

You may encounter other types of credit insurance:

  • Credit disability (or accident and health): It covers loan payments if you can’t work because you are sick, injured or disabled.
  • Involuntary unemployment (or loss of income): It covers loan payments if you are out of work involuntarily — a layoff or termination, for instance.
  • Credit property: It protects the property you used to secure the loan — your home, for example, in the case of a mortgage — against damage, loss in an accident, disaster or theft.

The value of these products depends on the price and your situation. Is your job insecure, for example? Is your health or mobility at risk? Also, does it really make all of your payments or only partial ones?

Alternative: Compare the price of term life insurance.Regular term life insurance is usually much cheaper in the long run,” says Money Talks News founder Stacy Johnson. Also, you likely get disability insurance through your workplace.

3. Travel insurance

Travel insurance can be confusing. There’s protection against canceled trips, interrupted trips, medical expenses and many other risks. Policies vary in quality and in coverage. Some cover many eventualities; others insure against a single risk, like medical evacuation.

The New York Times recommends a one-stop site, InsureMyTrip, for policies, articles and detailed information about what products cover. Travel Insured International is another site for comparison shopping, Forbes says.

Expect travel insurance to cost about 4 percent to 10 percent of the cost of the trip, with a more-comprehensive plan costing more, says The Simple Dollar. It recommends six companies and cautions readers to look for exclusions and loopholes in policies.

Travel insurance is a waste of money when:

  • Your policy is riddled with exclusions.
  • You choose a policy that doesn’t cover the risks you are likely to encounter.
  • You buy coverage for risks you aren’t likely to encounter.
  • You only stand to lose the cost of the airline ticket cancellation fee.

When is it worthwhile? Travel insurance makes sense if you anticipate unusual risks, beyond the broad fear that “anything could happen.” Examples:

  • The traveler, or a family member back home, is in precarious health or elderly and fragile.
  • The trip involves a bigger-than-usual possibility of a major disruption — traveling in the tropics in hurricane season, for example, or visiting a country prone to political unrest.
  • A hitch in child care arrangements could force you to cut short or cancel the trip.
  • Airline connections are tight and missing one of them could set you up for significant costs.
  • Prepaid trips where a big deposit is on the line.
  • You’ll just sleep better knowing you’re covered and are happy to pay for peace of mind.

Medical and evacuation travel insurance

  • Medical insurance covers your care abroad when your medical plan doesn’t. (Medicare, for one, does not cover Americans outside of the United States.) First, call your medical plan to find out what it does and doesn’t cover.
  • Emergency evacuation coverage flies you home if medically necessary — a good idea if your trip entails risky activities (climbing or trekking, for instance) or if your health is fragile. But policies with lots of exceptions and exclusions may be a waste of money.

Alternatives: You may already be covered through your homeowners, life, auto or health insurance. Credit cards may offer some forms of travel insurance, like lost luggage, theft and life coverage.

4. Dental insurance

If you have dental insurance through work, you’re golden. Otherwise, a plan can run $50 a month or more for benefits that top out at as little as $1,000 a year. Don’t buy it thinking you’ll collect thousands of dollars’ worth of implants or other complex treatments. Your policy might just pay 50 percent for oral surgery and restorative care. It may not cover cosmetic dentistry at all.

The problem is the yearly cap on payouts. Dental plans haven’t raised these maximum payouts over the years, even though the premiums keep growing.

Affordable Care Act dental coverage: The Affordable Care Act requires some health plans to include affordable dental care for children. Some states allow insurers to offer family dental plans too. Healthcare.gov describes the ACA dental options.

Alternatives:

  • Discount dental plan: NerdWallet says discount plans charge “an enrollment fee of about $80 to $120 each year to get discounts ranging from 10 percent to 60 percent on all of your dental visits and procedures.”
  • Charitable clinics: Free or low-cost care is offered at community events for the uninsured at which local dentists volunteer their time. Check Dentistry From the HeartAmerica’s Dentists Care Foundation or find your state’s dental association online.
  • Dental schools: Many dental schools give free or reduced-cost care. Accredited programs are listed at the American Dental Association website.
  • Preventative care: Dental disease can be largely prevented by brushing and flossing correctly and taking other measures.
  • Federally qualified health centers: These private clinics receive some government funding. Find clinics in cities and rural areas across the country on the federal Health Resources and Services Administration website.
  • Medical travel: Some Americans travel long distances for dental care abroad, particularly in Mexico. They can often find care that’s comparable in quality but considerably cheaper than at home. Medical travelers typically “need a lot of work, like 10 or 20 crowns,” Dr. Jessica Nitardy, who lives in El Paso, Texas, and practices in Ciudad Juarez, Mexico, tells The Atlantic.

More Money Talks News

Comments

  • F R Bradley

    Yes, BUT on rental car insurance. Yes your auto policy will probably cover rental car damage but even small damage can be a significant policy payout and can jack up you premiums for three years. Seems the total repair cost involves the daily rental charge for the days the car is in their shop getting the dent pounded out! If they decide to repair “their” car that “you” damaged at “their” leisure, “your” insurance company pays those daily rental charges plus whatever the damage was. They rent the car from themselves at the top rental daily charge for as long as “they” decide it takes! What a way to make money!

    You can get into big bucks quickly. And that counts against your claim history! Some credit cards have a $20 CDW Total coverage for up to 40 days per rental (actually $19.95 for the full period) and it keeps it off your insurance record!

    Just a thought

    • Jcatz4

      I don’t think that there are many spots on a car that can have a dent pounded out. A few yrs. ago, a guy cut over from the left lane right in to my car and hit me. Luckily, we were in a 25 mile and hour zone and we were both going slower than that – no injuries – no air bags deployed. The front of my car around the headlight cracked like an egg. The guy’s car only had a slight dent (maybe that could be pounded out) on the passenger side door.

      • Dotsie Watson

        It’s hard to pound out polyester fiberglass.

  • clearvoice

    Your point on Travel Insurance shows your lack of knowledge on this subject. I bet you didn’t know if your boss requires you to work and you can’t travel your covered. Hm… I know you didn’t know this. Maybe I should apply for your job.

    • Sandy

      I got critical care insurance in January because insurance was mandatory and since the VA reimburses me but on April 29 I was diagnosed with ALS. It is expected to pay enough to pay off my mortgage so my son can inherit the house.

  • Bob K

    Buy liability insurance. It is cheap ($1,000,000 is ~$15/month; $2,000,000 is ~$25/month). If someone is injured because of you or on your property, you can’t skip out by claiming bankruptcy. Assuming you have no investments/real estate worth going after, with the minimum liability (auto – $50,000), if you injure someone (e.g., to the tune of $1,000,000), the insurance company writes a check for $50,000 and you are on your own for the rest, as well as in court and you are likely to see ~25% or more of your income disappear for the REST OF YOUR LIFE, including SS!

  • Bob K

    Avoid that slimeball insurance company, Gerber life, that is trying to sell life insurance for kids. The prices are astronomical, the amount of insurance so low as to be worthless and ONLY those WITH dependents need insurance, NOT dependents. It is a con.

  • Ray Combs

    I agree with you on most of your comments regarding “Identity Theft Insurance” as related to credit card theft and their unauthorized use. But using the term “Identity Theft” covers much more than just credit card theft. There are several companies that market credit card protection but they are limited in any protection they might provide. A true Identity Theft protection plan monitors SSN, bank accounts, DL #, Passport #, email addresses, phone numbers, addresses, and does so for the entire family including minor children and then provides full restoration if your Identity is breached for as long as it takes and whatever it takes. That would be the gauge for choosing the correct Identity Theft Protection Plan

  • GBrin

    Informative article, but mostly wrong. First, in which state(s) is Ms. Lewis licensed as an insurance consultant? If she is not licensed, why is she distributing unlicensed and unprofessional advice? Second, insurance is regulated by individual states. Some of Ms. Lewis’ “advice” may be okay in some states, but much of it would blatantly fail my state’s Department of Insurance guidelines.

    Her comments on points 1, 2, 3, 8, and 10 can be counter-argued but for simplicity take them at face value. Points 4, 5, 6, 7, and 9 are fraught with errors and misinformation, much beyond space limitations to enumerate in this forum.

    Your best solution is to seek licensed professional advice on all insurance matters.

  • bruce m

    on the article about life insurance by Stacy Johnson. I don’t know what this person is talking about when they mention get term life and not permanent life insurance. term life ins. is worthless. it’s only good if your a young family(husband, wife and a kid or two) and bought a house and want some kind of protection until the kids are grown up and out on their own. term life is otherwise garbage,especially when you get into your 60’s. that’s when the premiums start to double, then triple then quadruple, etc. you need some kind of locked in life insurance so that when you die, your family won’t have to come up with $10,000 or more to bury you. so with permanent insurance at least you know your family will get multi-thousands of dollars(depending on what policy you get) to pay for funeral expenses and not have to take out triple mortgages on your home to pay for that . For permanent life ins. the premiums are a fixed amount of money per month so there aren’t going to be any surprises down the road especially when you get into your 60’s and beyond.
    so I highly disagree with this Stacy Johnson.

  • marketfog

    Car rental insurance. My former insurance agent gave me this advice. If I am renting a car for only a day or two, take the insurance offered by the agency, assuming the agency is legitimate. Then, if you have an accident, it will be over and done. If the rental is longer, depend on your own auto insurance, assuming you have this coverage. Use a credit card. If you have an accident, the rental agency will max out your card until you make arrangements. Obviously, if you use a debit card, this will lock up your entire bank account. Carry a second, different, credit card because you will not be able to use the first card for travel expenses.

  • Tony

    One type of “insurance” is disguised as a warranty when you buy tires for your car: “Road Hazard Coverage.” This replaces a tire if damaged within a certain number of miles but has so many limitations on it you’re almost sure not to recover the cost— which can be up to $100 depending on your automotive retailer.

  • Jane Hayes

    I’m considering appliance insurance which covers appliances, heating/cooling, well& septic for approx 600/yr any advice?

  • Y2KJillian

    Burial insurance: BIOGIFT. Sign up, carry the card–they’ll pick up your body, use you for medical scientific research and teaching, and return your “cremains” to your family if they want them. COST: FREE. The only problem is you must NOT have a contagious disease, and you must be within their weight guidelines. My husband qualifies on the weight issue; I don’t. My daughter-in-law comforted me by suggesting I might lose a hundred pounds during “final illness.” Thanks, honey.
    $10,000 for a funeral? No way. Even for me, cremation is much cheaper than that. Check with your state about scattering laws. AND–I know some people prefer to be buried. This doesn’t apply to them, of course.

  • Kathleen Barker

    I disagree about the dental insurance. I’m retired and therefore no longer have coverage through my employer. My premiums (about $400 per year) are slightly less than if I paid cash for twice yearly cleaning, check-ups, x-rays. Those things are covered fully. Plus, the amount the insurer pays the dentist is much less, which preserves a good amount of the annual payout cap for unexpected procedures. So, overall, for me, it is less expensive than no insurance and paying out of pocket.

    • Georgia Wessling

      I also agree about dental insurance. I had it thru my state job. It did pay up to 1/2 of all my bills. It cost me $50 a month for my husband and I. But he never used it. Our local, small town dentist was more than reasonable in his costs and did not accept most insurance. When my husband got a tooth pulled for $25, I called his office and had them send me a schedule of their costs. I cancelled my insurance and started going to him. Now that I’m alone, I never spend more than $200 a year on cleanings, fillings, etc. The only bad thing I had happen was my fault. Two weeks before my first appointment with the new dentist, I got a terrible tooth ache in a jaw tooth. Rather than try to get into this new dentist who was 90 miles away, I went back to the one I was using before. He said I needed a crown and it would be $600. I couldn’t afford it. He offered payments, but I said no. So, he pulled the tooth. Two weeks later, I told the new dentist. He said I should have called and come to him. He could have gotten me a crown for $300 and if I didn’t care what it looked like, he could have gotten me a metal one for $90. Yikes, was I upset at myself! He has been a good dentist and I have saved bunches going to him. In a small town he owns his own office, bought from his father who was a dentist before him. His utilities are not as high as in the big cities. Therefore, he can still make a good living and not charge exorbitant prices.

  • rickbolger

    When I was in my early 20s I bought an extended warranty (a type of insurance) on a VCR. Hate to admit that.

  • bigpinch

    “10. Rental car damage insurance
    If you have full coverage on a car of your own, you probably don’t need rental car coverage, no matter what the gal behind the rental car counter says. Go ahead and waive it.”
    Alternatively, if you rent the car with a credit card, your card agreement may also cover rental car damages, already, if the car you are renting retails for less than $50,000.00. I have two cards that do.

  • Jim Wiggins

    I have now have collision coverage on an older vehicle. Last year, when I had only collision coverage: I was hit by an insured driver who was at fault. His company initially denied fault. I was stuck paying for my repair and rental until my lawyer talked to their lawyer. Eventually, one day before the time limit in my state, his insurance paid for my repairs and rental. I paid the bill for my lawyer, which was much less than the repair. With collision coverage my company would have paid for the repair and rental within days and the two insurance companies would have worked it out eventually.

    • wootz

      I had full coverage insurance with State Farm for over 45 years when got hit by a SR25 insured driver my insurance company did not help at all. They told me to go thru the SR25 insurer’s policy. Took 7 days for their adjuster to determine my car was unsafe to drive. I was working night shift and had to drive in 17 degree weather with the windows down because of the fumes (35 miles each way). The driver had shoved my muffler through the manifold and all I got was the run around from both agencies. The SR25 Agent (in Texas) hung up on me and I had to go thru the adjuster to get my auto fixed along with a rental. My full coverage company did not step in the help me in spite of several calls, just said to go thru the other company. I have had one minor accident in 55 years of driving.

  • LagunaLady27

    I pay $564 for dental insurance and get $1000 worth of dental care in return. If I ever use it all, the dentist charges me using their lower fees rather than her usual non-insurance rates. This is a bargain.

    I planned a very expensive trip to Key West for two weeks last December. I bought my airline tickets ten months before the trip, and paid extra for insurance. When the airlines changed their routes, and I had to buy a new ticket at a higher rate, the insurance paid the difference. This saved me about $400.

    • bigpinch

      I belong to AAA. They offer “trip interruption insurance.” It is a pittance compared to what airlines charge. I bought the insurance, had to cancel the trip and it saved my butt, financially.

      • LagunaLady27

        Thanks for the suggestion. Do you have to make your reservations through them in order to buy it? The insurance I bought was less than $40.

        • bigpinch

          At the time I did it (three years ago) I made the cheapest reservation I could through the airline and got the insurance through AAA. Things may have changed. I hope not. I remember that it was an afterthought and I called AAA separately.

  • larrytucker

    What was your dumbest insurance purchase? Buying Child’s $25,000 life insurance policy for our grand daughter at age 3 from Globe Life. $17.50 per month. She is now 30+ years old and the actual cash value is less than $10,000. Better to put $17.50 per month in the stock market for 30 years!

    • bigpinch

      Wow! You really did get screwed. When I and my brother were born, my aunts and my mother bought life insurance policies on us. The reason was that infant mortality was pretty high in the Appalachian Mountains where we lived and infant funerals were priced above what most people could afford.
      Well, we lived. Those policies that only cost a few cents a week turned out to be worth multiple times their initial value because, once they matured, the dividends were used to automatically purchase additional insurance. My mother gave me several of them when I turned 30 years old and needed cash to buy things for my new home and farm. They amounted to a substantial sum. Not as much as I would have liked but, then, it didn’t cost me anything.

      • larrytucker

        “Wow! You really did get screwed. When I and my brother were born, my aunts and my mother bought life insurance policies on us. The reason was that infant mortality was pretty high in the Appalachian Mountains where we lived and infant funerals were priced above what most people could afford. Well, we lived. Those policies that only cost a few cents a week turned out to be worth multiple times their initial value because, once they matured, the dividends were used to automatically purchase additional insurance. My mother gave me several of them when I turned 30 years old and needed cash to buy things for my new home and farm. They amounted to a substantial sum. Not as much as I would have liked but, then, it didn’t cost me anything.”

        Settings

        A new comment was posted on Money Talks News

        bigpinch

        Wow! You really did get screwed. When I and my brother were born, my aunts and my mother bought life insurance policies on us. The reason was that infant mortality was pretty high in the Appalachian Mountains where we lived and infant funerals were priced above what most people could afford. Well, we lived. Those policies that only cost a few cents a week turned out to be worth multiple times their initial value because, once they matured, the dividends were used to automatically purchase additional insurance. My mother gave me several of them when I turned 30 years old and needed cash to buy things for my new home and farm. They amounted to a substantial sum. Not as much as I would have liked but, then, it didn’t cost me anything.

        4:46 p.m., Thursday May 19

        |

        Other comments by bigpinch

        Reply

        to bigpinch

        bigpinch’s comment is in reply to

        larrytucker:

        What was your dumbest insurance purchase? Buying Child’s $25,000 life insurance policy for our grand daughter at age 3 from Globe Life. $17 … Read more

        You’re receiving this message because you’re signed up to receive notifications about replies to disqus_gZl5UId1B1.

        You can unsubscribe
        from emails about replies to disqus_gZl5UId1B1
        by replying to this email with “unsubscribe”
        or reduce the rate with which these emails are sent by
        adjusting your notification settings.

  • Hienie Thu Nguyen

    yeah i know this is a fact. only in america do they put a life insurance policy and tell you to get it. this is crazy that is why i want to move out of the states and go somewhere else. it’s too much here

    • bigpinch

      I’m sorry that you’ve had such a bad experience that you want to move somewhere else. The idea behind insurance, Life, Automobile, Medical, etc., is that by buying the insurance, people spread the risk of unexpected expenses around, among those who buy the insurance.
      Truth be told, there are several insurance products that are less valuable than others and some not worth buying at all. But, if you talk with several insurance agents, you may find one or two that are more forthcoming with the information you need to make a wise decision.
      Depending on where you live, there are first and second generation Vietnamese professionals that can assist you in overcoming whatever language barriers there may be to your fully understanding your options.
      God bless you.

  • socrates

    The recommendations in 5 and 6 are true in general for the normal consumer public. But they are both absolutely false for high net worth / sophisticated investors. The insurance industry has a special place carved out in the tax code that gives insurance policies special treatment. For this reason, both wealthy families and banks make much use of permanent life insurance to form a vault of capital that has almost unheard of benefits.

    What if you could find a bank that paid you 5-6% (or more) on your deposits; if you died in the first 20 or 30 years, your heirs got several times the value of your deposits back; if you get terminal, critical or chronic illness, you get funds (again – many times greater than the value of what you have deposited) to either pay for treatment or pay your bills from becoming unable to work; creditors can not get at the funds (in many states); if you are seeking education assistance, the funds don’t count against you on a means test; if you use the value of the funds in the account to purchase a house, car, send kids to college, etc, they are still counted in the account as still being there and growing, and smart depositors NEVER pay taxes on the interest earned!

    You might say these are all too good to be true. Sadly, for most insurance agents and carriers, you are mostly right. But there are specialists in the insurance industry that do almost nothing but engineer these types of policies for clients. And more of these clients are middle class Americans. We have built our own tax-free retirement or private pension that we can pass on to our heirs as we pass on financial intelligence of the top 1%.

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,022 more deals!