Seven Types of Insurance That Are Usually a Waste of Money

Choosing insurance coverage is all about mitigating risk and betting that a catastrophe will (or will not) happen. Car insurance—liability coverage at the very least—is mandatory in almost every state, and while homeowners or renters insurance isn’t required by law, your lender or landlord may demand it. Health insurance is a worthwhile investment for many people; you can also buy insurance for your pet, valuable property, credit cards, and all manner of life-and-death scenarios. But should you?

Whether you buy insurance (and how much coverage) depends on your specific needs and risks, and you should evaluate yours before making any decisions—but here are seven types of insurance you can probably skip.

Rental car insurance

Rental car companies will always try to sell you on their insurance policies in case you get into an accident or otherwise damage your rental. But if you have auto insurance for your own vehicle, you’re likely already covered, and the add-on policy is an unnecessary expense. Many travel credit cards also have rental car insurance coverage as a benefit as long as you pay with that card.

Of course, check your coverage limits and policy fine print—your US-based auto insurance may not apply to cars rented abroad, for example.

Travel insurance

It’s tempting to add trip protection to a pricey flight, cruise, or hotel booking, and in some cases, it may be worthwhile. But travel insurance has a variety of limitations and exclusions, and you may already be covered in the event of trip interruption, delay, or cancellation as well as lost baggage if you pay for your reservations using a travel rewards credit card.

If you’re traveling domestically, your health insurance may cover any medical expenses that arise when you’re away from home, and your homeowners or renters policy may cover personal items that are lost or stolen.

Unless you’re traveling internationally on a vacation of a lifetime with a complex itinerary and a lot of prepaid and nonrefundable activities, travel insurance is probably unnecessary.

Whole life insurance

Life insurance is a good investment for replacing your income and supporting your loved ones if you die, but only if you buy the right kind: term life insurance. According to Dave Ramsey, whole life insurance is a rip-off. Whole life plans are expensive, confusing, and ultimately don’t offer the value you’re paying for.

Mortgage life insurance

Mortgage life insurance pays for your remaining mortgage balance if you die. A term life insurance policy offers this coverage and more, so a separate policy for your mortgage may not be worth the investment. Plus, premiums don’t decrease as you pay down your loan (at which point you need less coverage anyway).

Critical illness insurance

You can get insurance to cover specific—and costly—medical concerns like heart attack, stroke, cancer, and organ transplants. While these policies are relatively inexpensive, they’re only useful in limited cases, payouts may be restricted, and it costs more for each additional illness you want covered. A good health insurance plan combined with a health savings account and disability insurance (if you’re significantly younger than 65) may suffice.

Burial insurance

Burial insurance is a type of life insurance that covers funeral costs and other expenses after death. Some experts say this is predatory, as premiums are costly relative to the benefits paid out. A term life insurance policy or savings account for end-of-life expenses is likely a better investment for most people.

Extended warranties and device insurance

You can buy an extended warranty—an add-on offered by a retailer—for a lot of appliances and electronics, but these are generally a waste of money. Many items already have a manufacturer’s warranty, and any item of decent quality from a reputable company is not likely to need any additional coverage. Same goes for insurance policies specific to your phone or other devices. You generally end up paying more for the coverage than you’d get with a payout, and your credit card may actually cover theft or damage.

from Lifehacker https://ift.tt/ACTjdO8

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