From protecting your fantasy football team to guarding against cold feet at a wedding, insurance policies can be found for just about every risk and occasion. Here are five tempting types that you should think twice about:
1. Rental car insurance
Just about anyone who has rented a car has experienced the awkward moment when the agent asks whether you want to add rental car insurance. Often the question comes with a list of anxiety-inducing options to navigate: collision damage waivers, supplemental liability protection, personal accident insurance, personal effects coverage. It's easy to say yes, just to be safe.
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But all that insurance can tack $20 to $40 per day onto your costs. And you may well have the coverage you need from other policies like your health or personal auto insurance, or even the credit card used to pay for the rental. In particular, check your personal auto and credit card policies ahead of time to understand what they cover — and be mindful of restrictions. For example, a credit card may offer reimbursement up to the value of the car, but no coverage at all for personal liability if you or someone else gets hurt. Rules can also differ depending on whether you're using the car for business or personal reasons.
2. Credit card insurance
This comes in many forms, but there are four basic types. Credit life insurance pays your balance in the event of your passing. Credit property insurance pays the debt on items purchased with the card if they've been damaged under very specific circumstances or, in some cases, stolen. Credit disability insurance covers your minimum monthly payments for a specific period of time if you are coping with a medical disability; ditto for credit involuntary unemployment insurance if you are laid off or downsized. In the latter two cases, the insurance applies only to purchases made before your life change.
Insurance like this is a boon to the credit industry, bringing in, by some estimates, more than $2 billion in revenue each year. But again, you may already have comparable coverage under other policies. (For example, many people get a standard $50,000 life insurance or short-term disability policy through their employers.) Even if you don't, there are likely less expensive policies out there that will provide the protection you're looking for. Plus, as a matter of philosophy, you'd be better served by being a responsible credit card holder — paying your bill off each month and refraining from running up balances — than by incurring the additional cost of the insurance.
3. Extended warranties
Considering additional coverage for your television, smartphone, or other big-ticket electronics? The answer is pretty cut and dry: "Our reader surveys have shown time and again that extended warranties are not a good deal for most consumers," Glenn Derene, electronics editor for Consumer Reports, told DigitalTrends.com. "Many products are reliable and don't break during the period covered, and the plans cost as much as you'd pay for a repair that might never be required."
It's also important to know yourself: If you like to upgrade to the latest and greatest models when they become available, an extended warranty really doesn't make sense.
One exception, Derene notes, is Apple's extended warranty/service plan for computers. He says the company consistently stands out in surveys as offering the best computer tech support in the business, and if you're worried about accidental damage, it could pay to sign up.
4. Identity theft insurance
Identify theft is a big problem — as of 2014, the number one consumer complaint for 14 years running. But identity theft insurance policies don't protect you from the theft itself, and they don't cover your monetary losses. Instead, the insurance acts like a watchdog on your accounts; it often includes credit alerts, and account and credit monitoring. It also reimburses you for costs associated with resolving the issue, like phone bills, notary and certified mailing costs, and attorney's fees.
All of that might sound useful, but you can be your own watchdog by signing up for free online banking and mobile apps that monitor your accounts. Or pay yourself for credit monitoring, which is still likely to cost less than a comprehensive ID theft policy. You also can make a habit of reviewing your credit report for unauthorized accounts (you're entitled to one free report annually from each of the three major credit-reporting bureaus). As for the costs associated with recouping your losses, they could easily be smaller than the insurance policy's deductible.
5. Pet insurance
The decision to buy pet insurance, which usually covers cats and dogs, is economic and emotional — which makes it especially challenging. Pet owners will probably incur at least one $2,000 to $4,000 bill for emergency care at some point during their pet's lifetime. And it's easy for the bills to climb even higher when surgery is required or a chronic condition like cancer needs treatment. Having insurance can help offset some or most of these costs, and also help avoid a situation where you have to put a pet down because you can't afford treatment.
But pet insurance is far from a panacea. Preexisting and chronic conditions may not be covered. The same goes for annual checkups, vaccinations, spaying or neutering, and dental care. The upshot is you're likely to incur many health care costs that can't be avoided. And, if your pet is generally healthy, you'll probably come out ahead over the years by paying out of pocket.
One alternative is to establish a savings fund dedicated to your pet's unanticipated health care costs. But if you are leaning toward buying insurance, be sure to shop around. Pet insurance policies come with a variety of deductibles, co-payments, and premiums. The price varies — and can change over time — depending on your pet's age, the cost of veterinary care, and the coverage options that you choose (for example, accident only, or accident and illness). Breed also is a factor; insuring purebreds cost more due to their susceptibility to some hereditary conditions (the most expensive: great danes, English bulldogs, and Bernese mountain dogs). Typically you have to pay out of pocket and wait for reimbursement. Some policies pay a percentage of what the vet charges for a procedure, whereas others only pony up a set fee.
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