13 Insurance Policies That Are a Complete Waste of Money, but Almost Everyone Buys

Being fiscally smart means being prepared for the future. Insurance policies can help protect against the worst.

However, not all policies are created equal. Reading through the fine print and the caveats, you may find the coverage isn’t worth the paper it’s printed on.

Over the years, I’ve invested in some insurance policies that were better off left on the drawing table. These are some of the ones, based on my experience, I would recommend against.

1. Rental Car Insurance

Every time you rent a car, the agency will push its own insurance policy on you — and it’s not cheap. But here’s the kicker. If you have existing automobile coverage, you don’t need it.

Most people buy the additional coverage for the peace of mind knowing they won’t have to file a claim should something happen. But, it’s easy enough to handle the matter through your own insurance agent and it costs you nothing extra.

2. Travel Insurance

If you travel a lot, it can be tempting to safeguard your trips with a policy so you don’t lose out if something — cancelations, lost luggage, falling ill — happens. However, it’s very important to read that teeny-tiny print, because chances are it includes a significant number of exclusions.

That’s not to say it’s never worth it. Sometimes it is, you just have to know what the caveats are.

3. Flight Insurance

Piggybacking off the travel insurance, there’s a specific flight insurance policy offered by airlines. It’s said to protect against canceled or delayed lights.

But, here’s the thing. Federal law mandates that airlines must reimburse you for canceled flights or help you find another one. They must also arrange for accommodations caused by their delays or cancelations. So it’s a waste of money that goes straight into the airlines’ pockets.

4. Life Insurance Beyond Retirement Age

There’s a time to invest in life insurance, and after you retire is not it. By this point in your life, you should be free of most large debts that will not be passed onto your family in the event of your death.

If you were to apply for it at an advanced age, say in your senior years, you’re likely to pay much more for it than you would, say in your 20s or 30s.

5. Identity Theft Insurance

Identity theft is very common these days, particularly because of the amount of information people put online and how easily some fall for scams. But, is an insurance policy to safeguard against this really worth it?

First, the insurance policy doesn’t actually prevent identity theft. That’s important to know. It helps cover costs associated with trying to restore your identity after it’s already happened. It’s better to stay on top of your credit report and monitor your credit cards and bank accounts for any fraudulent activity. Make sure you report it as soon as it happens.

6. Pet Insurance

I don’t know about you, but my pets are part of my family. For that reason, naturally, I want to protect them, too, and save myself a few bucks in the meantime. Vet visits can be crazy expensive, especially where testing is involved.

However, it’s a good idea to go into choosing a policy with your eyes wide open. The American Veterinary Medical Association has some great guidelines on what to look for when you’re shopping around.

7. Collision Insurance (On Older Vehicles)

Most states mandate you have automobile insurance on your registered vehicles; New Hampshire and Virginia are the two exceptions. However, there’s something you should know. When your car ages, it’s a good idea to drop collision coverage.

You should drop collision insurance after the car’s value depreciates to the point that the insurance deductibles, or the repairs themselves, are more than the vehicle is worth. Keep comprehensive coverage, though, to protect against other incidents.

8. Whole Life Insurance

For most of us, we’re always wondering what would happen to our loved ones if we unexpectedly passed away. Life insurance can help mitigate financial damages, such as loss of income, but there are different kinds.

Whole life insurance covers a person’s entire life as long as they keep making the monthly payments. Term life insurance, often seen as a better alternative, covers a specified period of time and costs a lot less.

9. Gap Insurance

When you apply for a car loan or a mortgage, many times the lender will offer you the choice of purchasing additional gap insurance. This policy is meant to cover the amount you owe on your vehicle or home if you unexpectedly pass away or suffer a life-changing disability.

In addition to being expensive, these policies are rarely ever used and when they are, the coverage they provide tends to be less than the policy itself.

10. Children’s Life Insurance

When my children were born, I was very surprised to hear my insurance agent ask if I wanted to open life insurance policies for them.

There are a few situations where it’s a good idea. If your child has health issues, establishing a policy early in life means they’ll have one later. Additionally, if they are actors or musicians who help support the family, that might be a viable option. Otherwise, stick some money away in an investment account for them to inherit when they graduate high school or college. It’ll go a lot further.

11. Extended Warranties

No, this isn’t one of those annoying calls to sell you an extended warranty. But they are available on many electronics and appliances. Typically, they’re unnecessary.

The manufacturer’s warranty is usually enough to cover a period where anything might go wrong. If you do want to buy one, do so on the larger-ticket items.

12. Flood Insurance

You might be thinking, huh? Don’t I want flood coverage? In some instances, such as living in a flood zone, absolutely.

However, some people buy it unnecessarily. If you don’t live in an area prone to floods or with any history of water issues, it’s quite literally a waste of money.

13. Disease Insurance

Did you know that you can buy insurance to cover critical illnesses such as heart attacks, strokes, and cancer? If you have a history of these diseases in your family, it can be tempting to purchase insurance in the off-chance you experience them, too.

Instead, try to make sure you have a comprehensive medical plan that covers you no matter what health issues crop up.