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3 insurance policies to skip

Some products that are marketed as insurance are best avoided.

By MSN Money Partner Jul 26, 2011 12:40PM

This post comes from Jim Wang at partner blog Bargaineering.

 

Longtime readers of Bargaineering probably recall that I don't have collision or comprehensive insurance on my car. It's a decision that paid off with my first car and one that I've stuck with on my current car.

 

While it helps that I don't drive very often (I work from home), it's a financial risk that I've decided to take on and certainly not an insurance policy I recommend you skip. (See: How does your vehicle compare on insurance rates?)

 

There are, however, plenty of insurance policies out there that I am comfortable suggesting that you skip. Here are just three of them:

 

Extended warranties. You might not think that extended warranties are insurance policies, but they are -- they protect your products. Are they worth it? They usually are not worth it because you are almost always protected by another means, especially if you pay with a credit card. Many credit cards double the manufacturer's warranty for up to one year. It's a feature you're already paying for.

 

If you really love extended warranties because you don't mind paying for peace of mind, don't buy them at the store. You can almost always buy one from another provider for far less. The general rule of thumb is that you shouldn't pay more than 15% of your product's value when buying extended insurance and you should get it only on things that you use a lot or move a lot (like cameras and laptops). Post continues after video.

ID theft insurance. Identity theft is a big problem nowadays and fixing a case of identity theft can cost you a lot of time and a lot of money. But the solution isn't in buying identity theft insurance. Identity theft insurance is sold by financial institutions, like your bank, and by ID theft insurance specialty companies, like LifeLock. In most cases, they are simply doing things you can do yourself for free. My guide on do-it-yourself identity theft protection can give you a head start.

 

Mortgage or credit card life insurance. Some life insurance companies offer a benefit in which they will pay off your mortgage or a credit card balance in the event you die. These insurances are often more expensive than a comparable term life insurance policy, which pays a set dollar amount in the event of your death.

 

I've always believed that when it comes to insurance, don't try to profit or play games. Let life insurance cover any outstanding liabilities and make sure your family isn't put in financial jeopardy. (See: How much life insurance do I need?)

 

Are there any other insurance policies you think people should skip?

 

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