17 Insurance Products That Are A Total Waste Of Money

A factor in virtually everyone's budgetary math, insurance coverage is a crucial part of responsible financial management and emergency preparedness. There are always going to be bumps in the road, and with insurance protection, the stress of dealing with any number of potentially expensive emergencies can fall away and allow you to think clearly. Getting things back in order and returning to your routine is essential, especially for those with young children or people living paycheck to paycheck. Emergencies that create financial hardship can lead to lasting delays in planning other features of typical life. An emergency with your car or a hospital visit could see you struggling to make ends meet in the short term, and perhaps even delay big purchases farther out like a grand vacation or a new appliance that your home desperately needs.

Insurance, on the whole, is a quality means of defraying emergency expenses. However, not all insurance products offer the same layer of quality coverage. In many instances, opting for additional protections does more harm than good. For instance, veterinary care coverage for your pet often won't allow you to break even on the expenses that you pay out throughout your dog or cat's life. The coverage can ease your worry over potential future emergency care, but the financials don't tend to make sense when viewed on a wider scale. That and other insurance products often end up wasting your money. Here are some that you should likely avoid.

Rental car insurance

When renting a car, you're likely to experience an upsell from whoever you deal with at the check in desk. Adding an insurance product to a car rental reservation is a lucrative opportunity for rental car companies. These insurance products are often fairly expensive and may come with large deductible figures as well. Rental companies may even be quick to point out the astronomical deductible you may be on the hook to pay in the event of an accident without additional coverage, hoping to push concerned customers toward this added expense.

But renters are likely already covered when they drive a car off the lot. In addition to protection through your own car insurance policy, rental cars are a product that should virtually always be purchased with a credit card. This often gives you access to a lower deposit and it adds the little-known benefit of insurance coverage. Many credit card companies offer added perks, and rental car insurance is something that's commonly found among card issuers. To activate the coverage, however, you'll need to decline additional coverage products when reserving your car and completing the checking process before you take possession of the vehicle. As a result, purchasing rental car insurance is a complete waste of your money because you already have it baked in for free.

Flight insurance

Another type of insurance that acts as a redundant layer of protection for buyers and a simple money grab for the seller is the flight insurance upsell. This is a product that many airlines now offer during the checkout phase of travel booking. Utilizing the social proof concept, airlines are often quick to advertise how many people have added travel insurance to their reservations in the last day or hour. The purpose is to influence new buyers into spending a little extra money on this coverage feature. However, flight insurance is a redundancy you don't need. If your flight is canceled, the airline will have to accommodate you during any delay or refund the price of your ticket altogether. There's no need to purchase additional insurance to protect you against these kinds of delays or setbacks.

On a more somber note, in the event of a crash that injures or kills passengers, airlines are on the hook to pay out benefits to injured travelers or their beneficiaries without the need for travelers to add on any contingency coverage. Flight insurance is therefore just a way to charge you a little more for the same ticket. On another note, airline reservations are yet another product that should always be purchased with a specialized rewards credit card. Airline specific cards offer free checked bags, upgrade opportunities, and many other perks that you don't have to pay for as long as you pay with your card.

Credit life insurance (or dealership gap insurance)

Gap insurance from a car dealership or credit life insurance, as it's sometimes known, is an optional addition to lending products like mortgages and car loans. This coverage can seem like a good idea, offering to bridge the gap between the value of the asset and what you owe on it in the event of death or an inability to work. It seems particularly useful when considering the math on your car's depreciating value versus its repayment figure.

However, this insurance product is often far more expensive than the benefits it offers. Premiums are exceedingly high, especially when purchased through the dealership. To make matters worse, some lenders may incorporate this type of coverage as a requirement rather than an optional addition. Other lenders may even try to sneak it into the terms of your borrowing agreement, even though this practice is illegal. The real issue with credit life insurance and gap insurance coverage is that it doesn't benefit you or your loved ones. The beneficiary of this insurance product is the lender. In the event of the unthinkable, this insurance will kick in to pay off what you owe in whole or part rather than giving your loved ones a financial boost. Beyond the expense of monthly payments on this type of insurance, opting to incorporate additional value in a life insurance policy provides your loved ones with more flexibility and should be the preferred route.

Travel insurance (depending on coverage rules)

Travel insurance is often characterized more by what it excludes rather than what is covered. Travel insurance may seem like a great idea as you plan a fantastic holiday or quick weekend getaway with friends or family. Having this fallback allows you to really kick loose and enjoy your vacation. Travel insurance may be used to cover the expense of lost baggage, injury or health complications while away, and much more. But it's important to read the fine print on any policy you're considering purchasing before committing to it.

This is because travel insurance is often riddled with exclusions and restrictions. A cursory reading of the terms can leave you thinking you're covered for all kinds of emergency needs only to be left holding the bag if a problem does arise during your trip. Additionally, many travel insurance companies make the reporting and reimbursement process exceedingly difficult and lengthy. As a result, you may have to bear the cost upfront and then work for weeks or months after the fact to be made whole—something that many insurance purchasers expect to avoid when opting for coverage.

Whole life insurance

Whole life insurance is something of an investment rather than a pure insurance policy. The term doesn't expire, so when you die, your beneficiaries will be paid the benefit amount, regardless of whether you live to 40 or 112. Many people who are settling down and having children consider purchasing life insurance to help support their family in the event of a tragedy. Indeed, the primary use case for life insurance is typically as a safety net to replace a parent's income if they suddenly pass away. This gives families some semblance of comfort in knowing that their lifestyle isn't likely to be affected on top of the massive tragedy they've experienced. Term life insurance offers this backstop with reasonable pricing and good coverage. Unlike whole life insurance, a term policy lasts for a set number of years and might be used to cover a family for the 20 or 25 years directly following the birth of a child, for instance.

Whole life insurance can be used to augment your estate. As long as you maintain your monthly payments, your family will see the benefit when you pass. But the added cost of a whole life insurance policy can be better leveraged through retirement investments or other asset purchases. Saving the difference in monthly premiums and adding it to another investment opportunity can grow your wealth more efficiently over the long term, leaving more for your family in the long run.

Burial insurance

Experts suggest that the cost of burial insurance relative to the benefits it offers is extremely slim. Some even go as far as to suggest that burial insurance products are predatory and should be avoided at all costs. The reality is that life insurance and other savings products can be used to offset the cost of burial and offer a more efficient use of your money. Life insurance policies can include an additional benefit to cover burial costs, and act as a more valuable option on the whole than specific insurance products aimed at this need.

Alternatively, there are plenty of other ways to plan for your end-of-life expenses. For one thing, anyone who isn't particularly concerned with how they are laid to rest might consider cremation rather than a traditional burial. Traditional funerals rack up an average bill between $7,000 and $12,000 while a cremation runs between $6,000 and $7,000, on average. This choice can save your loved ones a significant amount of money. But no matter what you ultimately choose saving for this expense yourself rather than relying on an insurance product will often result in a more efficient management of one of life's inescapable features. You're simply likely to pay more by purchasing an insurance product than if you set money aside.

Any type of life insurance after you hit retirement

Life insurance acts primarily as a protection against lost income or as a means to pay off large debts that won't be discharged with the owner's death (think mortgage loans not federal student loans). For those without a considerable debt load and have reached retirement age, new life insurance products likely won't represent a good use of your money. If you've saved diligently for retirement, you're likely to leave at least a nice portfolio of assets and cash to your loved ones after your death, added life insurance products can bolster this inheritance — perhaps dramatically — but they aren't going to provide you or your spouse much if any benefit. For those with substantial debts or limited retirement savings, a new life insurance product at this stage might be worth considering, but the premium is likely to be drastically higher in advanced age so it's worth weighing the value against the expense carefully.

Additionally, for some people who hope to leave a sizeable inheritance for their loved ones, a new life insurance product might offer a path toward this goal. But generally speaking, you may be better off continuing to invest and save rather than banking on what essentially amounts to a "cost-effective death" that takes place before you've paid a large chunk of cash into the policy. Betting against your longevity is certainly morbid, and the reality is that there are likely better ways to go about boosting your estate's value.

Life insurance policies for children

In the same way that a life insurance policy doesn't make tons of sense for someone in their older years, life insurance to cover children is equally wasteful spending. To put it bluntly, life insurance is a hedge against losing a source of income. Your children don't function as income-generating resources, and therefore a life insurance policy generally isn't useful. There are of course exceptions, and child actors and other young stars might consider this approach if they are contributing to family finances. Young ones born with chronic illnesses might also benefit from early coverage since a policy later in life may be far more expensive or entirely unavailable. But for the vast majority of individual families, there is no need to take out a life insurance policy to protect some sort of financial value in your children.

Instead, a great way to help set your children on a great financial path involves investing on their behalf. Setting money aside in a savings account or even an investment account will give them a great jumpstart on their future and might even serve as a great opportunity to teach responsible money management lessons along the way.

Identity theft insurance

Identity theft insurance purports to defend consumers against fraudulent activity taking place in their name. The idea here is to limit or eliminate liability for fraudulent spending that results from a stolen credit card or identity information. These kinds of insurance products might provide some additional assistance like coverage for lost wages or legal expenses you might incur during an identity theft resolution.

However, the reality is that resolving these kinds of financial issues doesn't typically take very long, and credit card providers are typically amicable to work with during the dispute process. Moreover, many card issuers include identity theft monitoring and coverage as a standard. The FTC notes a variety of regulations regarding the time between fraudulent charges and reporting them. However, credit card companies are often very flexible with their zero-liability policies. Generally speaking, if you've been the victim of credit card fraud, you won't realistically have to shoulder the burden that activity in your name creates. Therefore, there's little need to invest in an insurance product to cover these costs.

Collision insurance on older cars

Older cars aren't generally worth much in relation to newer models. The older your car gets the more value it loses. This phenomenon is something that everyone understands, but it isn't typically felt as a factor in day-to-day driving. The only time your car's financial value matters at all happens either when you consider trading it in or when you've been involved in an accident. Many people opt to include multiple types of car insurance coverage so that they can recover as much money as possible when the time comes to repair or replace a damaged vehicle. However, collision insurance is something that people should become less interested in adding as their car ages.

The deductible for your collision insurance is often decently high, meaning your insurance company will decline to cover some minor accidents and charge you a hefty deductible fee in order to take care of larger ones. If you find yourself driving something that isn't worth much, you may end up paying considerably more every month for your insurance coverage then you'll ultimately recover in the event of an accident. Instead, people who drive older vehicles should select the cheapest possible coverage option and then start putting away cash for a replacement or emergency repairs on their own. Rather than involving your insurance company for what ultimately won't be very beneficial and may raise your rates over the long term, prepare on your own to mitigate the damage from a potential collision.

Pet insurance

In 2011, Consumer Reports conducted a study on veterinary expenses, focusing on a 10-year-old Beagle named Roxy. The Beagle had amassed a total vet bill of $7,026 throughout her life, adding up to a substantial cost, to be sure. However, when Consumer Reports sought to price out insurance policies that would have covered all of these expenses the outlet found not a single provider who would have totaled a cost less than the actual bills themselves. Even when nearly doubling these expenses with additional, hypothetical illnesses and other veterinary requirements (taking the proposed total expenses to more than $12,000) only about half of the policies studied would have actually benefited the dog's owner.

Pet owners often worry themselves over potentially exorbitant costs to care for their dog or cat, but the reality is that taking each bill as it comes is actually the smarter move when seeking to keep costs as low as possible. Moreover, for those worried about the potentially costly emergency, it might be worth setting aside a bit of cash every month rather than paying a premium to an insurance company. While an insurance provider might decline to cover certain medical expenses, diagnostic tests, or surgeries, you can elect to approve or skip anything you want. If you price out a policy and then pay that money into your own savings account to cover emergency medical expenses you'll have far more flexibility to weather any storm that might come your way.

Extended warranty coverage

Retail stores are often quick to offer additional warranty protection for large electronics purchases and other gadgets like headphones, game consoles, and other devices. The sales pitch is typically the same, no matter where you do your shopping. Based on the purchase price you'll be offered an extended warranty plan that might last a year or more at a seemingly reasonable cost. However, most electronic devices today are sold with fairly substantial manufacturer's warranty coverage already in place. More importantly, if you're purchasing a device from a reputable brand then any potential breakage issue you might face will almost certainly occur directly after you start using the new gadget rather than a year or more down the line. It's possible to get unlucky and purchase a defective unit, but any defects present will showcase themselves virtually immediately.

The fact is that warranties from manufacturers offer more than enough protection to ensure that your gear won't break and leave you in a lurch. As well, you may also have the opportunity to take advantage of coverage from your credit card provider if you purchased the item with a card that includes this added insurance product. There's simply no need for extra insurance that comes at a cost beyond the unit's purchase price.

Dental insurance

Dental insurance seems like an important product to add to your healthcare coverage. Everyone has teeth and seeing the dentist regularly will help you keep yours looking great and feeling healthy. Regular cleanings translate into better overall health so it can seem like a no-brainer to purchase dental insurance to assist in defraying this cost.

But dental insurance coverage is notoriously stingy when it comes to payout rates and the procedures that are covered. If you need new X-rays, you may end up paying for them yourself if your policy won't cover more than one in a single year or perhaps over an even longer period. The same goes for implants, fillings, and a variety of other routine procedures involved in dental hygiene and care. Payout caps, percentage-based coverages, and a laundry list of exclusions and restrictions make dental insurance a product that often fails to pay for itself.

Home warranty coverage

A home warranty policy can seem like a great idea, especially for landlords and new homeowners who don't want to have to deal with the hassle and cost involved in fixing broken-down appliances and other routine maintenance issues in the home. However, home warranty policies often restrict your choice when it comes to selecting technicians to perform repair work at your property. This means that you'll have to select a handyman and technicians that are "in network," as it were, and this can leave you with little to no choice in the decision to select the person who will care for your home.

Perhaps more importantly, homeowners are often charged a call-out fee and when technicians arrive at the property they may ultimately decide that the problem isn't something that should be covered by the policy. In the same way that a health insurance provider might claim a preexisting condition and shirk responsibility, any number of added factors might contribute to a home warranty provider declining to pay for a repair as a result of some sort of operator error rather than a genuine defect in the appliance or item in question — whether legitimately or not.

Home and contents insurance

Home insurance policies often include protection for emergency repairs and coverage of accidental damages. You might call your insurance provider if a baseball flies through the front window or if an inattentive driver crashes through the front wall of your home. However, many people seek out home and contents insurance to cover their property and belongings in the event of inclement weather and other natural disasters. 

Unfortunately, insurance providers have become exceedingly adept at shirking financial responsibility when it comes to hurricanes, flooding, tornadoes, and earthquakes, to name just a few. Natural disasters of any sort are typically excluded from regular homeowners' insurance products so if you're hoping to protect your home and its belongings against these kinds of damage you'll need to look elsewhere. Even issues like fire are often covered by their own type of insurance. Therefore, many of the issues you may be worried about in your home simply won't be covered by what might seem like a catchall policy.

Mechanical breakdown coverage

Mechanical breakdown insurance is a policy that helps you get back on the road in the event of a non-accident-related issue with your vehicle. Breakdown coverage will support you when faced with a variety of mechanical issues under the hood and throughout the vehicle. However, these insurance products often incorporate plenty of restrictions and exclusions, and insurance companies are often quick to suggest that a problem in your vehicle isn't covered by the policy for one reason or another.

These claims can become pretty inventive and drivers across the country will likely know someone whose repair work was initially or ultimately not covered by an insurance policy that seemingly should have kicked into effect. As with many other insurance products found here, you might be better served in pricing out a policy and then simply depositing that amount every month into a savings account set aside specifically to care for your vehicle.

Opting for low deductible figures

Finally, when shopping around for insurance, you may be tempted to select a policy with a low deductible figure. This means that if you call your insurance company in order to cover some sort of emergency repair work or other expense — be it a hospital bill or a burst pipe in the basement — the amount you have to pay out of pocket will be lower. A $200 deductible means that you have to pay your insurance company $200 to manage the claim and pay for the emergency, for instance. A low deductible seems like a great idea since it will reduce the amount you have to cover out of pocket in the event of a claim.

But, the lower your deductible is the more expensive your policy will be every month. Putting this into perspective, it's a good idea to think about how many times you've called your car insurance or homeowners' insurance provider in the last year, or even five. When dealing with insurance products that cover routine expenditures like health insurance for your children, a lower deductible may be worthwhile. However, for high-cost, low-usage insurance products the reality is that you'll likely save more by paying less each month than you would by reducing the out-of-pocket expense if and when you need the policy.