6 Insurance Policies That Aren’t Worth the Money
"Insurance is meant to protect against the really big stuff that rains down on you," says Fair Oaks, California, insurance agent Alan Canton. But Canton and other agents know that not all insurance policies are created equal.
Accidental death and dismemberment
Free or low-cost policies offered by employers usually cover accidents involving death or dismemberment, so there’s no need to buy it on your own, says Joan Antoniello, vice president for personal and corporate insurance planning at Weiser Capital Management. And while the average $15-a-month cost is low, the premiums add up ($180 and more a year) —money that could be better spent on adding some other type of insurance, she says. Here are 16 things you should do to prepare for death before it’s too late.
Comprehensive and collision coverage for old cars
Of course, you want to keep your car insured (it’s the law in most states), but beyond the minimum requirements, there’s often no need to get comprehensive and collision coverage for a car with a very low Kelley Blue Book value, says Joel Ohman, a certified financial planner and the founder of carinsurancecomparison.com. Collision covers the cost of replacement and repairs after a typical car accident, while comprehensive takes care of events like fire, theft, vandalism, and falling objects. The latter coverage is often required by lenders, but once the car is paid off and the car’s value has dropped, many people forget to stop paying for it, Ohman says. A good rule, he adds, is that if collision and comprehensive coverage cost more than 10 percent of the car’s value, turn down both types of coverage. Don’t miss these other 7 ways you’re wasting money on your car.
If you already have car insurance, don’t buy it at the car-rental counter, says CPA Steve Elliott. Your existing policy should cover you if something goes awry. There are times when car-rental insurance may make sense, however. Ray Martin of CBS MoneyWatch points out that while your existing car insurance or credit cards may already cover a rental car, it’s a good idea to opt for the insurance if you’re driving outside the country or have high deductibles for personal effects stolen from the rental car. Also, avoid renting one of these 10 car models most likely to get stolen.
Mortgage life insurance
Mortgage life insurance is basically life insurance meant to pay off a home in the event of a tragedy. However, mortgage life is typically 200 to 300 percent more expensive than term life insurance. If you had a $100,000 mortgage, for example, you would spend two to three times more on mortgage life insurance for that amount than you would if you bought a term life policy for $100,000 in coverage for 30 years. And with mortgage life insurance, the money typically goes directly to a mortgage lender, not to your family. It may make sense, however, for people who have a medical history that makes term life insurance prohibitively expensive.
Critical illness insurance
When you’re worried about facing something as devastating as cancer, paying $70 a month for critical illness insurance might seem like peanuts in comparison to the massive hit your wallet would take for treatment. (Ease your tumor fears by making these 37 science-backed ways to prevent cancer a habit.) The thing is, traditional health insurance actually offers a lot more protections. For instance, they’re more likely to increase their prices when you get older and might even drop your benefits completely after a certain age—but you’re probably less likely than you think to need it before the costs skyrocket. “People greatly overestimate their risk of getting cancer at any one time compared to getting lots of other conditions that are less frightening but also very expensive,” Timothy Jost, law professor emeritus at Washington and Lee University, tells Consumer Reports. Don’t miss these other 18 secrets health insurance companies don’t want you to know.
Extended car warranties
Yes, a car is a huge purchase and you wouldn’t want to lose it in one accident, but be wary of those extended warranties. One Consumer Reports survey found that 55 percent of buyers never cashed in on repairs with their extended warranties. Here’s the real kicker, though: The warranties covered around $1,200, but those who got repairs through the warranty had paid hundreds more than that for the plan on average. In that case, you’d be better off paying out of pocket for the fixes. Check out these other 34 secrets car dealers won’t tell you.