Which Insurance Policies Aren't Worth It

The Affordable Care Act required every American to have health insurance. If you want to drive a car, you need car insurance. If you have a mortgage, you are typically be required to have mortgage insurance. And other types of insurance, such as life insurance, are not required by law but can be beneficial to have.

But there are so many different types of insurance policies, and surely not all of them are wise investments. So which insurance policies might not be worth buying? 

Car Rental Insurance

Unless you’re driving outside of the country, your existing car insurance policy should cover you in a rental car. It’s a good idea to double check your policy first, but car rental insurance can often simply be a way for the rental car company to squeeze a few more bucks from you.

Auto Medical Insurance

Automobile medical insurance provides coverage in case you are injured in a car accident. Considering that tens of millions of people are injured in car accidents every year, this type of insurance might sound like a good idea on the surface. But if you have health insurance, you are likely already covered in the event of an accident.

Cell Phone Insurance

Today’s smartphones retail for hundreds of dollars, and phones are routinely dropped, lost or stolen. It’s easy to see then why so many people opt to have an additional $5-8 added to their bill every month for insurance. And a number of cell phone insurance policies come with a deductible of up to $200.

Many people receive phone upgrades every 1-2 years with their plan contract renewals, which essentially negates hundreds of dollars spent on insurance — or roughly the cost of a new phone.

Identity Theft Insurance

Identity theft is big business for criminals and has thus turned into big business for insurance companies. But between federal consumer protections and the fraud reimbursements offered by most financial institutions, most identity theft victims do not face any real need for additional insurance just for this specific threat.

Credit Insurance

Credit insurance is often sold by lenders when you apply for credit. This type of insurance will pay off the loan if you were to die before being able to pay it off yourself. This brings peace of mind to parents who worry that their children will inherit their debt. 

But the truth is that according to most state laws, your children probably won’t inherit your debt anyway, especially if you have enough assets or life insurance to cover those debts.

Divorce Insurance

Divorce insurance helps cover attorney fees, court costs and other expenses that come along with a divorce.

But signing up for divorce insurance is likely not worth your money. The product is typically sold in “units.” For example, each unit could cost around $16 per month for $1,250 of coverage, which isn’t typically payable for 48 months. So by the time you can even collect on the policy, you’ve invested $768 for a payout of only a few hundred bucks more. After just seven years, you would have paid more in premiums than you’d be getting back in return.

Mortgage Life Insurance

Not to be confused with mortgage insurance, mortgage life insurance provides protection against your mortgage debt in the event of a premature death. The simple reason why this type of insurance may not be worth it is because term life insurance is typically much cheaper, can cover the duration of the mortgage and pay out a greater sum. Plus, term life insurance will be paid out to your loved ones, while mortgage life insurance will just go to the lender. 

So before you sign on the dotted line for additional insurance policies, take a minute to ask yourself if that policy is truly worth it.

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Sources:

Association for Safe International Road Travel: http://asirt.org/initiatives/informing-road-users/road-safety-facts/road-crash-statistics

Time: http://time.com/money/worth-it-buy-cell-phone-insurance/

Business Insider: http://www.businessinsider.com/your-children-probably-wont-inherit-your-debt

Money Crashers: http://www.moneycrashers.com/what-is-divorce-insurance-coverage

Life Insurance Direct: https://www.lifeinsurancedirect.com/life101