9 Types of Insurance That Might Be a Waste of Money

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

But many other types of insurance offer little value, or they’re filled with exclusions and caveats. Following are some potentially dumb insurance buys.

1. 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 a medical evacuation.

Travel insurance can be a waste of money if your policy is riddled with exclusions, or you choose a policy that doesn’t cover the risks you are likely to encounter.

However, Money Talks News founder Stacy Johnson notes that there are situations where travel insurance makes sense. To find out more, check out Should I Buy Travel Insurance?

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

2. Collision coverage on an old car

The collision portion of your auto insurance policy pays for repairing or replacing your car after a crash.

Older cars lose value fast. That means the premium costs for collision coverage might not be worth it if your car is especially old. (If you have an auto loan, your lender will probably require you to keep this coverage in place.)

Do not, however, drop your auto liability insurance. That coverage generally is mandated by law. If you hit someone else, you’ll need it to pay the other driver’s costs.

Alternative: Take the amount you normally would spend on collision coverage premiums and put it into a savings account to help pay for your next car. Stop by our Solutions Center to find a savings account with a great rate.

3. Home warranties

Consumers frequently expect more than these plans deliver and end up frustrated. Read “Do You Need a Home Warranty? Here’s How to Decide” for a breakdown of the pros and cons of home warranties. Hint: There are few pros.

If you decide to go with a warranty, read the fine print to see what’s really covered.

4. 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 the theft promptly. According to the Federal Trade Commission:

“Under federal law, the amount you have to pay 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 by a thief, you aren’t responsible for any unauthorized charges.”

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

Report a debit 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 — or might even face unlimited liability, the FTC says.

Repairing your credit and damage to your identity can be time-consuming and costly. But the National Association of Insurance Commissioners says identity theft insurance only offers so much protection:

“Identity theft insurance cannot protect you from becoming a victim of identity theft and does not cover direct monetary losses incurred as result of identity theft. Rather, this coverage pays for expenses related to reclaiming your financial identity, such as lost wages, attorney fees and documentation reporting.”

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 fraud alert on your credit file. Finally, weigh the pros and cons of freezing your credit.

5. Dental insurance

If you have dental insurance through work, you’re golden. If you have to buy your own policy, however, don’t buy it thinking it will cover thousands of dollars’ worth of implants or other complex treatments. Your policy might just pay 50% for oral surgery and restorative care. It may not cover cosmetic dentistry at all.

Alternatives: A discount dental plan can get you reduced prices on your dental visits and procedures. Other options for cheaper dental care include charitable clinics and dental schools.

6. Children’s life insurance

Adults buy life insurance coverage for themselves to provide for their families in case they die. Arguments in favor of taking out life insurance on children include locking in insurance for them at a young age in case it becomes impossible or too expensive to insure them later because of illness or playing high-risk sports. Some advocate coverage for possible funeral expenses.

But unless the family depends on the child’s income, there’s no need to insure the child’s life.

Alternatives: Save for the child’s education or open an investment account for him or her. If necessary, you could use those funds to pay for death expenses without giving a penny to insurers.

7. Rental car insurance

If you have full insurance coverage on a car of your own, you probably don’t need rental car coverage, no matter what the person behind the rental car counter says.

Alternatives: Make certain you are covered under your own auto policy. Your credit card also may have coverage if you pay for the rental with the card.

8. Extended warranties

Whether you are buying a TV, computer or hedge trimmer, chances are the sales associate will suggest you purchase an extended warranty. In most cases, you don’t need it.

Products seldom break during the two-to-three-year period after the manufacturer’s warranty and service plan expires. And the repairs can cost less than you might think, according to Consumer Reports.

Consumer Reports also says stores keep 50% or more of what they charge for these contracts, which is a considerably larger profit margin than they make selling the product. In some cases, the salesperson also gets a hefty cut of every warranty sold.

9. Pet insurance

Most people consider pets to be part of the family. Veterinary bills can be high, and insurance can be a good call in certain circumstances.

If you do opt for pet insurance, first take a look at the American Veterinary Medical Association’s guidelines for pet health insurance policies.

Marilyn Lewis and Hiram Reisner contributed to this post.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
10 Products That Upgrade Your Home for Less Than $45
10 Products That Upgrade Your Home for Less Than $45

Make a fresh start with these affordable Amazon buys.

20 Great Part-Time Jobs for Retirees
20 Great Part-Time Jobs for Retirees

Maybe you’re not ready to leave the workplace entirely.

7 Mistakes Guaranteed to Ruin Your Retirement
7 Mistakes Guaranteed to Ruin Your Retirement

Make even one of these money mistakes, and you’ll probably end up eating ramen noodles in your golden years.

10 Ways Retailers Trick You Into Spending More
10 Ways Retailers Trick You Into Spending More

Think you’re a savvy shopper? Find out how retailers persuade you to dig more deeply into your wallet.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

5 Ways Joe Biden Wants Social Security to Change
5 Ways Joe Biden Wants Social Security to Change

Here’s where Biden — as well as Trump — stands on the future of the Social Security retirement system.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.