Insurance can mean peace of mind and money in times of trouble. But don't let some salesperson sell you insurance you probably didn't even know existed before they pushed it on you.
If you drive, you have car insurance. If you can afford it, you have health insurance. If you’re raising children, you probably have life insurance. But then there’s insurance you don’t need – if you even knew it existed before a salesperson tried to sell it to you. Here are three policies you should probably pass on…
1. ID theft insurance
Having a criminal assume your identity can be devastating – both financially and emotionally. But the companies that sell this kind of protection can’t wave a magic wand to make it go away.
I was once informed that I had an outstanding warrant for my arrest in a city I had never been to. It turned out that someone thought it was a great idea to give out my name and birth date, instead of their own driver’s license, when they got a ticket. I had to have an attorney contact a judge in that jurisdiction to prove my innocence and clear my record – something most ID theft policies wouldn’t have covered.
Most of the things they do for identity theft victims are things that you can do yourself – like setting up credit monitoring, putting a hold on all new applications, or requesting a change of mailing address. Many credit cards already include some identity-theft protection service as a standard benefit. MasterCard, for example, says on their website “(MasterCard) assists you with credit bureau notification and credit card replacement, and provides you with an ID Theft Affidavit should you become the victim of Identity Theft.”
Before considering such a policy, take a look at what you can do yourself and what’s available from the cards you already have in your wallet.
And while we’re on the subject, there are a few easy, free ways you can protect yourself. Check out 7 Ways to Prevent Identity Theft and 7 Steps to Recover.
2. Credit card insurance
Credit card holders can get several types of insurance policies. Some pay off your credit card debt in the event of your death, while others cover your minimum balance in the event of disability or involuntary unemployment.
But these policies usually have a maximum benefit. The life insurance policies are a terrible value for most people next to comparable term life insurance. Besides, credit card debt is unsecured, and your survivors may not even be responsible for it. Consult an estate planner to be sure, but you’re probably better off saving your money and paying off your debt instead. (For more, read Dying in Debt: Can You Take It With You?)
3. Cell phone insurance
Compared to your house or your car, even an expensive smartphone is still a relatively minor expense – and isn’t worth insuring.
Add up the cost of insuring it each month, along with the policy’s deductible, and you’ll come up with a number that’s the same or higher than the price of a refurbished phone. Unless you’ll be losing or breaking your phone every year, you’ll usually be better off just saving your premiums and spending them on your next phone.
If you do decide on a cell phone policy, you’ll want to carefully examine the terms and conditions to be sure of what’s covered and what isn’t. The best policies are often offered by the service provider itself and include some type of data recovery, remote disablement, and GPS tracking service. With this kind of policy, you should be able to recover your phone or at least your data, if not your purchase price.
Insurance is one of the few things in life that we buy and hope to never use. So if you do pay for it, make it count. You always want to properly protect home, car, and life, but look carefully at policies you didn’t even know existed before someone tried to sell them to you.