I'm a big believer in having the appropriate amount of insurance, especially when it comes to your health and personal liability. But if money is tight and you want to get the most bang for your buck, there are a few types of insurance you can probably do without – or that may duplicate coverage you already have elsewhere:
Extended Warranties. When you buy a car, appliance or electronic device, the salesclerk usually will try to sell you an extended warranty. These policies often duplicate coverage already provided in the manufacturer's warranty. Plus, many credit cards provide an additional warranty on items purchased with the card.
Smartphone Insurance. After shelling out big bucks for a smartphone, you might be tempted to buy replacement insurance. Just be aware that you'll probably pay a hefty deductible and likely receive a refurbished phone, possibly not even the same model. My advice: Keep your old phone to reactivate in case you drop or lose the new one.
Flight Accident Insurance. The risk of dying in a plane crash is miniscule and already covered by regular life insurance. Also check your credit card cardholder agreement, since many cover such accidents for tickets purchased with their card.
Child Life Insurance. Life insurance is intended to provide economic protection for a person's dependents, so unless your children are movie stars supporting you, this coverage is probably unnecessary. You can better protect their future by stowing those monthly premiums in an emergency savings account or buying additional term life insurance for yourself.
Pet Insurance. With veterinary treatments now rivaling human medicine (organ transplants, chemotherapy, etc.), you could easily spend a small fortune keeping Fido alive. Before buying pet insurance, however, compare plan features carefully and weigh the expense you'd pay out over your pet's lifetime. For example, monthly premiums increase with your pet's age, deductibles and copayments are typically higher than for human coverage and there are usually predetermined per-year and per-condition caps. Plus, preexisting and hereditary conditions usually are not covered.
Rental Car Insurance. In most cases, the optional insurance offered by car rental agencies duplicates existing coverage you already have. However, before automatically rejecting agency coverage, ask your insurance company and credit card issuer whether you are fully covered for rental cars. A few considerations:
- Coverage through your auto policy often expires after 30 days or less of renting the car.
- Sports cars, luxury models, SUVs and trucks are often excluded.
- Travel outside service areas typically is forbidden – especially across foreign borders or in rough terrain.
- If you don't carry comprehensive and collision coverage on your own car, your insurance may not cover a rental. Also, ask whether such coverage is limited to your own car's value, since most rentals are new.
- Ask what happens if you violate rental agreement terms (e.g., driving recklessly or allowing unauthorized drivers).
Specified Disease Insurance. Some people take out supplemental health and life insurance against specific conditions such as cancer, heart disease or stroke. Before buying, make sure you have adequate major medical insurance, which already covers such conditions. And carefully review the policy for restrictions. For example, many cancer insurance policies won't pay for outpatient care or cover skin cancer, and impose fixed-dollar limits on specific procedures.
When it comes to your budget – and your family's security – it pays to know which insurance is essential and which you can probably skip.
[Jason Alderman directs Visa's financial education programs. To participate in a free, online Financial Literacy and Education Summit on April 17, 2013, go to www.practicalmoneyskills.com/summit2013.]