Insurance is part and parcel of everyone’s life, but there are some insurance policies that might not be so useful and a waste of money, yet many people tend to buy them.
Here is a list of ten insurance policies that are a complete waste of money, but almost everyone buys them.
Rental car insurance
Rental car insurance offers financial protection in case of damage or theft of the rental car. It also protects if someone is injured or property is damaged in an accident while driving the rental.
Most rental companies offer this insurance while renting a car for an extra fee, but in most cases, this is a waste of money because both credit cards and existing auto insurance that people have already cover rental cars. Credit cards cover accidental damage theft as long as the rental company’s insurance declined during purchase and the entire rental cost is paid with the card.
Flight insurance
Airlines offer flight insurance during checkout when booking flights. It is advertised as protection against flight delays, cancellations, crashes, or injuries. Despite this, flight insurance is seen as a waste for numerous reasons.
Airlines have policies to accommodate passengers and refund money in case of delays and cancellations. In case of crashes, the law compels airline companies to compensate beneficiaries. Some credit cards offer flight insurance and added benefits like upgrades and lounge access.
Identity theft insurance
Identity theft insurance is advertised as financial protection for identity theft victims. However, the extent of financial protection is unclear in many cases, and experts say it’s limited to expenses like legal fees and notary fees, the costs incurred to cover expenses after identity theft happens.
Identity theft insurance is a complete waste of money because not only does federal law exempt individuals from any responsibility for credit card fraud, but the limit of liability for any unauthorized use of credit is a minimum of $50. Credit card companies also offer help by limiting the liability to $50 or less if theft is reported within two days, and the maximum liability is $500.
Burial insurance
Burial insurance is a type of life insurance that covers the cost of funeral expenses, including burial, cremation, and other related costs. Burial insurance is often marketed as a way to ensure that loved ones are not left with the financial burden of funeral expenses, but it can be expensive and is a complete waste of money.
Experts suggest against burial insurance and say it’s a complete waste of money for numerous reasons. General life insurance can often be used to cover burial expenses, and burial insurance tends to cover only a part of the burial expenses or is insufficient to cover the entire funeral costs. This insurance rate also increases with age, and it can become a burden to pay in old age.
Credit life insurance
Credit life insurance is often sold by lenders or creditors to borrowers, typically as an add-on to a loan or credit agreement. The policy normally covers the outstanding balance of the debt, and the insurance company pays the beneficiary the amount owed. It is often offered when a mortgage or automobile loan is taken.
Credit life insurance is often called a complete waste of money as it is overpriced and has limited benefits, it doesn’t provide any death benefits to the beneficiaries, and it doesn’t always cover outstanding debts. It is considered predatory because some lenders try to make it compulsory when taking a car loan when it should be optional; there are also instances where lenders include the policy and its costs in the loan agreement, which is illegal according to the FTC.
Extended warranties
Extended warranties are insurance policies that extend the manufacturer’s warranty on a product for an additional fee. They are usually offered for appliances and gadgets.
For many reasons, extended warranties are criticized as a waste of buyers’ money. If the products are purchased via credit card, the credit card company is likely to offer some type of extended warranty or insurance.
Even without this, every manufacturer provides a product warranty that covers essentials like protection against breakage or theft. In case of repairs, the cost of getting an appliance or a gadget repaired is typically less than the warranty cost.
Pet Insurance
Pet insurance covers veterinary expenses for pets like dogs, cats, and other animals. While it is marketed to protect pet owners from the financial burden of veterinary costs, it can be expensive and unnecessary.
Pet insurance premiums are very high and have very low coverage limits. Further, these premiums also have many exclusions; if a pet has any pre-existing condition, the insurance won’t cover any treatment arising from such a condition. They might also not cover hospital and diagnostic expenses like tests, surgeries, and scans.
Experts advise pet owners to set aside a certain amount of money at regular intervals for their pets instead of paying hefty insurance premiums.
Life insurance for children
Life insurance for children is a type of insurance policy that provides a death benefit to the policyholder’s beneficiaries in the event of the child’s death. This is a great investment only if the children are suffering from severe, chronic diseases.
Otherwise, it’s not a worthy investment; one of the main reasons is that children are listed as beneficiaries in the parents’ insurance premiums and will inherit the money if anything happens to the parents, but since children are unlikely to die prematurely.
Another major reason is that children don’t generate income themselves, so there is no benefit from an insurance policy. The rate of return on these premiums is also low.
Credit card insurance
Credit card insurance provides coverage for credit card debt in the event of the cardholder’s death, disability, or job loss. While this seems like helpful insurance, it is considered a waste of money because of its high costs and limited benefits.
Additionally, most credit cards already have built-in insurance coverage for such events, making separate insurance unnecessary. Credit card insurance also has many exemptions, making it hard to get a good payout.
Private Mortgage Insurance (PMI)
PMI is an insurance required for borrowers who put down less than 20% of the house’s purchase price. It always benefits the lender, not the borrower; it protects the lender in case of defaulting by the borrower.
PMI is a bad investment because of its high costs and limited benefits.
Additionally, PMI can be difficult to cancel, even if the borrower’s equity in the home increases. This can lead to a situation where the borrower has been paying PMI premiums for years, only to have the insurance coverage expire or be canceled without providing any significant benefits.