8 types of insurance you don't need
Life is risky, but that doesn't mean you should pay for insurance policies and warranties that aren't necessary.
This post comes from Angela Colley at partner site Money Talks News.
Insure all that and it's possible that you and your friend have wasted hundreds of dollars.
Do you buy travel insurance? Rental car insurance? Pet insurance? Cellphone insurance? And did your friend buy wedding insurance? Life has risks, and paying to protect yourself makes sense -- health insurance to meet big hospital bills, for example, or homeowners insurance to cover catastrophe. But in the video below, Stacy Johnson looks at five types of protection you probably shouldn’t buy, or only after careful consideration. Check it out, then read on for more.
Here's more detail, plus a few other types of protection often not worth the money:
Identity theft insurance doesn't protect you from becoming a victim, or sometimes even replace money lost. The insurance only covers some of the expenses you accrue dealing with identity theft, such as the cost of mailing letters to your creditors and maybe some legal fees. It costs $20 to $100 per year, plus a $100 to $1,000 deductible, according to MSNBC.
Instead of paying for extra insurance, see if your credit card company offers identity theft recovery services. Some companies, like American Express, help you free of charge.
If your card doesn't come with it, you can still protect yourself. The Federal Trade Commission has a list of steps to take if you've been victimized by identity theft, including placing a fraud alert on your credit reports and canceling affected credit accounts.
Almost anything you buy these days has an extend warranty option: appliances, electronics, even lawn mowers. According to CBS News, extended warranties cost an average of 15% to 25% of the purchase price. So if you buy a $900 TV, that's $225.
Problem is, not all repairs are covered by extended warranties and you may have to pay shipping costs even if they are covered.
But if you're still considering an extended warranty, do the math first. Call a local electronics repair shop and ask how much they charge to fix a common problem with whatever you're buying. If the price quote is less than the cost of the extended warranty, buying one doesn't make sense.
Buying a warranty will cost $200 to $400 on average. For that money, it's supposed to cover the cost of repairing big-ticket items like a dishwasher, A/C unit, plumbing system, and electrical wiring.
But some consumer advocates say home warranties are full of exclusions, and the repair you need may not be covered. As Stacy explained in the video, the home warranty company he used claimed that because his refrigerator's coils were dusty, he hadn't properly maintained it, and it voided the coverage.
I was unsure about getting pet insurance for my dog, so I went online and requested a few quotes. The cheapest coverage I could find was "emergency only" for $11 a month. Full coverage cost $90 a month for a healthy, young dog.
The cheapest plan covered emergencies like a broken limb. The most expensive plan included an annual vet checkup and some medications. But no plan covered everything. I was still going to have to pay out-of-pocket for dental cleanings, grooming, and some illnesses. Genetic conditions and cancer also weren't covered.
While some people swear by pet insurance, many don't. So if you're going to get a pet policy, be very clear about the details.
Unless you're accident-prone, cellphone insurance isn't likely to pay for itself. The insurance costs an average of $5.64 a month, according to the Los Angeles Times, and most plans have exclusions -- like not paying for water damage or dropped phones. If you do have a covered repair, you'll pay a deductible depending on the price of your phone. (The deductible for my Android would be $100.)
If you have a smartphone, you probably have a manufacturer's warranty that already covers replacements and repairs. HTC has replaced my phone three times without charge -- no insurance needed.
My friend just spent $26,000 on her wedding, which included the venue, dress, photographer, caterer, and everything else that goes into the perfect wedding day.
She could have purchased wedding insurance, which typically covers some types of cancellations, companies going out of business before the wedding, and liability for guests. But it would have cost $320 to $420, according to USAToday.
Instead, she booked through reputable companies, charged purchases to her credit card to get reimbursement protection, and used her homeowners insurance to cover the wedding rings and gifts.
When the wrong flowers arrived, her credit card company issued her a refund. She didn't need extra insurance. You probably don't, either. Before buying this type of insurance, read more about what's covered and what's excluded. Then read the fine print.
What if you travel overseas and there's a natural disaster? Or civil war breaks out? Some travel insurance might help you safely evacuate the country, but few policies would reimburse the cost of your lost vacation.
Basic travel insurance covers your expenses should you get sick or have an accident while on vacation. But it won't cover you should a health or weather issue force you to cancel your trip. For that you'll have to purchase a more expensive plan that offers cancellation coverage.
According to Bloomberg Businessweek, a basic plan costs 5% to 7% of the purchase price of your vacation. A plan that includes cancellations costs 40% more.
Travel insurance isn't always a bad deal. Depending on your age, health and where and when you're going (e.g., the Caribbean during hurricane season) cancellation or other types of coverage might be prudent. But before you buy, see what your existing policies will cover. Your health insurance might cover you in other countries, and some credit card companies provide free insurance for travel. Ask before you leave.
If you do buy travel insurance, always read the fine print. Travel writer Christopher Elliott recently reported about an elderly couple who had to cancel a trip after purchasing $10,000 of cancellation coverage. They were denied any reimbursement because they failed to purchase enough insurance for the entire cost of the trip: $10,074. (After he intervened, the company agreed to reimburse them.)
When you rent a car, the company will try to sell you a "loss damage waiver." For about $19 a day, according to Autos.com, you're protected if you wreck the rental.
But you're probably already protected. If you have full coverage insurance on your own car, it may cover your rental as well, although many policies won't reimburse the rental car company for "lost use" of the rental car while it's being repaired, as well as administrative and other fees.
You might also be covered by your credit card company, if you rent the car with that card. Check with your insurance provider and your credit card company before you buy rental car insurance. When you talk to your card company, be sure and tell them the specific vehicle you're renting. For example, virtually no credit cards provide coverage for pickups or other types of trucks.
Bottom line? Carefully consider these and all types of insurance, and always read the fine print.
More on Money Talks News and MSN Money:
- 7 ways to slash the cost of homeowners insurance
- 7 things to consider before shopping for health insurance
- 6 ways to pay less for car insurance
- See how your car insurance company measures up
- What if you got hit by a bus?
- Should you insure your wedding?
Big difference between being ins. poor and ins. rich.
Every ins. co., good or bad, is this country's biggest rip off. Its next on the list after the housing bubble.. just wait.
Apparently the author of this article doesn't travel much. I travel internationally on a regular basis. I can tell you right now that travel insurance should NEVER be ignored!! I have been delayed many times (once even by the massive earthquate/tsunami that hit Japan in March 2011) and that travel insurance paid off. NEVER travel without it. You never know what will happen.
Car rental insurance insurance could be a bargain if your auto insurance doesn't include collision or your personal vehicle has collision but is worth much less than what you are renting. Say you are
renting a new Chevy Impala and the MSRP is $29,000. You have an incident and total the rental. You have collision on your 2008 Chevy Impala which is worth $8000. Your insurance will probably cover your accident with the rental vehicle but only up to the $8000 for which your personal vehicle is insured, not the $29,000 cost of the rental. You are liable for the remaining $21,000.
I think there should be legislation that says insurance certificates should be simple enough for a high school graduate to read and comprehend, and SMALL print should not be allowed. Consumers need to know exactly what they are, or are not getting, for the money they pay out.
If you buy SEARS appliance's, beware, their replacement / repair warranties ( insurance) STINK'S. they lie, dont show up, charge you for repair calls that are still under waranty, talk in riddles, try to convince you, thats the way the (appliance) is designed to work, a refrigerator that runs 24/7?, BULL. if you dont believe me, look up sears COMPLAINT page on the net. make sure you have a barf bag, it will make you sick. absolutly un-believable. sears used to be a trusted company, not anymore.
Why is it that whenever insurance companies make money, they are considered crooks. Yet, pretty much any other business making a profit is okay? People treat insurance like a maintenance policy, instead of a catastrophic event policy. That's a big reason insurance premiums increase year after year---that and the ridiculous amount of fraud out there. It's not because insurance companies want to make more and more money. If they weren't in business to make a profit, why be in business at all? The majority of the insurance companies out there do A LOT for the community also through charitable donations, jobs, scholarships, sponsorships, etc.
No one ever wants to put more risk on themselves----what, take a higher deductible and save money, but that means I have to pay more when I file a claim? Why would I do that? That's the true meaning of this article which the majority of people are missing---take more responsibility on yourself!! Save money by putting more risk on yourself.
If you want a NON-BIASED website to visit and research insurance appropriately, google iii (Insurance Information Institute).
Because insurance is mandatory in many cases UPICK14ME, and being just that, they take advantage of us.
How can I take more responsibility on myself when I am a "premium" member of my health insurance, but now have to pay to cover the Fat couple sitting at the buffet stuffing their faces for hours who are doomed to have heart disease/diabetes/who knows what.... You think that worker's comp insurance is all clean and green? Believe it or not, I own a policy that states that I have worker's comp, but am not allowed to file a claim. It costs my company of partners $500 a year plus audit fees, just to say I have a policy... which, by the way, is mandated by the state... So shuv your poor insurance company boo hoo's up your A$$ and wake up!
It all comes down to one thing...are you tired of the rich getting all the bailouts and us working men getting nothing? Take a look at what I found and see why the rich are trying to hide this for themselves. G00GLE the term ' CRAZY CASH TEACHER ' all one term and click the first site. Go right to the 'PENNY STOCK' page to see what the rich don't want you to know. It is time your family lives the good life and this will help. THIS IS AMAZING!!! THIS IS A MUSSSST SEEE!!!
insurance on lost and stolen not mentioned? there's no surprise. I know from personal experience what a stolen IPhone would have cost me without cell phone insurance. the Iphone is for my business. good thing I had it.
The majority of people would be better off without paying for ANY insurance and instead saving or investing that money. How else do insurance companies generate profits year after year after year. They always take in more in premiums then they pay out in claims by a LARGE margin.
I think it is amazing how many people will play lotto's when the odds are as horrid as they are yet insist on paying for insurance when the odds are completely reversed. My state lotto had 3 to 1 odds the last time I checked and might have gotten a little better, but in no way could it compare to the return I would get playing a game like Craps at a casino when the house only has a 1.2% advantage if played correctly with single bets. Meaning for those that need it spelled out, if I gambled $100 with lotto tickets after 1 drawing I would have $33 at 3 to 1 odds and $50 at 2 to 1 odds on average versus $98.80 compared to Craps. Insurance is the same way. How else do you think they can afford all those advertisements, buildings, offices, claims vehicles, worker's pay, dividends, etc.
People would drive better/safer if they did not think that "everything will be alright", "insurance will take care of everything for me". That is until they can find some way or reason to deny your claim. It makes them more money is why they would do it, that is why a insurance corporation exists. TO MAKE MONEY, lots of it, the MORE the better!
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