14 useless insurance policies |
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6. Credit card insurance
Don't pay even a few bucks a month for a policy that pays off your credit card debt should you lose your job, become disabled or drop dead.
Instead, your money would be better spent on staying out of credit card debt altogether, or insuring against those
possibilities directly.
"If you die, who do you want to get paid -- your spouse or your credit card company?" says Hillebrand. "And the
unemployment policies often don't repay the whole balance -- they only make the minimum payment."
7. Extended warranties
Why would you buy a two-year extended warranty on a new 42-inch plasma TV when the manufacturer's warranty covers it already?
NYU's Shapira says the answer has to do with what psychologists call framing, our state of mind in the moment of decision.
In this case, the risk of ending up with a suddenly useless $1,000 TV, however remote the possibility, seems greater than
the $40 for the additional coverage.
"Companies like Circuit City make a fortune on the warranties they provide," he says, "even though in today's reliable
consumer electronics market, defects are only going to happen once in 10,000, or whatever."
8. Flight insurance
Statistics show that your chances of perishing on a commercial flight are far less than on the freeway, yet people still insure against it.
"Flight insurance is definitely not worth spending money on," Hungelmann says. "If you buy flight insurance, what you're
really saying is, 'I'm scared to death that I don't have enough life insurance if I die.'
"What you should do instead is buy a cheap term life policy."
9. Flood insurance
Forget flood insurance unless you live in a floodplain or have a walk-out basement.
Why?
"Because hardly anything is covered down there except the furnace and appliances; all the carpeting and personal property
is not covered," Hungelmann says.
The chances of a 100-year deluge shorting out the washer and dryer in a walk-out basement are remote at best.
10. Life insurance for a child
The purpose of life insurance is to provide for your family and loved ones after your passing. Although you can insure the lives of your
children, why would you?
It's backward; the chances are far greater that they will outlive you.
Instead, use that money to buy an extra $50,000 term life policy on you, not them.
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