5 Useless Insurance Policies

Whether it’s auto insurance, home insurance, renter’s insurance, life insurance, or any other insurance, there are always policies that are somewhat useless and you don’t need. A lot of these policies are included in your insurance by default but when you opt out of them, you can save some significant amount of money. For instance, I opted out of towing and rental from my Allstate auto insurance to save money on car insurance. I do a bit of paranoia about it however, that I may end up needing those options when I most need them one day.

1. Private Mortgage Insurance (PMI) – Many homeowners who cannot afford the 20% down payment on their homes are required to pay additional payment on their mortgage, namely mortgage insurance.  PMI is an insurance policy that protects the lender/bank against any type of loss. Banks consider those little lesser home equity to be a higher risk borrower. They made that cutoff at 20%. If you make more than 20% down payment, then the banks are happy and you won’t be required to purchase the additional insurance policy. I believe that no one should be buying any type of private mortgage insurance. My policy is that if you can’t afford to make 20% down payment, then you can’t afford to buy a house. Get free quotes with LendingTree now.

2. Extended Warranties - How often do you get asked about purchasing an extended warranty when you make a purchase such as TV or a refrigerator? I bought an extended warranty for a digital camera I bought 10 years ago and it was the last time I bought any kind of extended warranty. It was the biggest waste of money. The extended warranty lasted only 2 years. By then I would in the market for a new and better camera anyway. Same goes for extended warranties on car purchases. More than 50% of Americans trade up their vehicles within 5 years of owning their cars. There is no point of buying extended warranties when you are going to be getting rid of your car within 5 years anyway.

3. Automobile Collision and Comprehensive – If you remove collision and comprehensive insurance in your auto policy, you can save a lot of money. It probably makes up more than 50% of your entire policy. Collision insurance is designed to cover the cost of repairs to your vehicle if you are involved in an accident. Comprehensive covers everything else, such as damages due to hitting an animal, theft and vandalism, and natural disasters. However, if your car is fully paid off, you are not required to purchase these insurances. If you have a relatively expensive car, it might be worthwhile to purchase these insurance. It may be difficult to come up with the money for repairs in case you are in the unfortunate situation. However, if you car is old and inexpensive to replace, you may be better off not purchasing them. The general rule of thumb is that if the annual insurance cost is more than 10% of the value of the car, then ditch the insurance from your auto policy. Get free quotes online with Geico.

4. Car Rental Damage Insurance – Many auto insurance policies already cover rentals, so there’s no need to pay for this twice. Check your auto policy before you pay a single cent for this coverage. If your insurance doesn’t cover it, then it may be wise to pay a few dollars for this coverage when renting a car.

5. Flood Insurance – There are more homes that are not in the flood zone than those that are. So unless your home is located in a flood plain or an area with a history of water problems, save your money by not  buying flood insurance. Get home insurance quotes now with US Insurance.

Tagged as: auto insurance, home insurance