This post comes from Angela Colley at partner site Money Talks News.
Imagine you’ve flown into town to attend a friend’s wedding. You’re driving down the highway in a rental car, with your dog by your side, chatting (hands-free, of course) on your cellphone.
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
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.
Extended warranties
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.
Home warranties
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.
Pet insurance
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.
Cellphone insurance
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.
Wedding insurance
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.
Travel insurance
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.)
Rental car insurance
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.
If you assume your insurance company will automatically apply discounts you’re eligible for, you’re probably wrong. Few insurance companies actively attempt to reduce their profits by calling you and offering discounts. Pick up the phone and ask for a full list of available discounts.