Buzz
In many ways, insurance is one of the least rewarding ways to spend your money. You pay for it with the hope you’ll never actually need it (and if you do, it only becomes more expensive). On the other hand, insurance offers peace of mind. But the truth is, you don’t need insurance for every little thing.
You’re aware that health insurance and car insurance are necessary, but renter’s insurance is also a smart choice. It's usually affordable and covers more than you'd expect. The same goes for homeowner’s insurance, and in most cases, lenders will require it. If you have dependents, life insurance is likely a good idea as well.
But what about all the other types of insurance out there? Which ones are total scams? MEL Magazine consulted Bill Ferguson, a professor of finance, insurance, and risk management at the University of Louisiana at Lafayette, to find out. Here are a few that are almost never worth it:
Burial insurance: Often a major ripoff, burial insurance is considered predatory by many consumer groups. If you live long enough, you could end up paying more for the insurance than the actual funeral costs. As Ferguson points out, most good life insurance policies already cover burial expenses.
Auto medical insurance: This policy covers your medical expenses if you're involved in a car accident, but as Ferguson notes, if you have health insurance, you're already covered, making this unnecessary.
Credit life insurance: This type of policy pays off your outstanding debts if you pass away. But, according to MEL, your life insurance probably includes this coverage already, and if you outlive the policy, you might end up paying more than the policy actually covers.
There are a few other types of insurance worth mentioning. Some identity protection services offer ID theft insurance, but it’s probably not necessary since most banks and credit card companies will reimburse you for fraudulent charges anyway. Similarly, cell phone insurance is often not worth it because you usually end up paying more than the coverage actually provides (plus, some credit cards might already cover you).
Travel insurance could be useful in certain situations, but it may not cover as much as you expect. I once bought it, only to find out it covered trip changes due to emergencies only. Moreover, your own health and life insurance will usually cover any medical expenses included in travel insurance. Also, credit cards often offer trip cancellation protection as a perk, which you might already have.
