Types of Insurance to Avoid: Smart Protection Tips

Insurance can safeguard your finances—but some policies offer little value, carry high costs, or duplicate better options. Here are several types of insurance you should typically avoid unless they align with a specific need.

1. Extended Warranties and Service Contracts

These policies are often sold with appliances, electronics, and vehicles. In many cases, they cost more in premiums than you’d ever receive in claims. Most products already come with manufacturer warranties, and repairs or replacements often fall within expected product lifespan.

2. Rental Car Insurance When You’re Covered Elsewhere

Standalone rental car coverage usually replicates auto insurance already provided by your personal policy or credit card. Unless you lack existing liability or comprehensive vehicle protection, buying extra rental insurance is redundant.

3. Flight Insurance

Commercial air travel is statistically safe. Flight insurance often pays only for extreme events and overlaps with standard life insurance. If you’re seeking financial protection for loved ones, a term life policy is more versatile and cost-effective.

4. Child Life Insurance Policies

Purchasing separate life insurance for children is typically unnecessary. Children aren’t wage earners, and a more practical approach is to add a low-cost child rider to an existing term life policy. Funds are better invested in savings or education plans.

5. Mortgage Life Insurance

This policy pays down your mortgage balance if you die, but the benefit decreases as you pay off the loan. It’s less flexible than term life insurance and often tied to the lender, with fewer options for your beneficiaries.

6. Credit or Identity Theft Insurance

Credit card theft protection often duplicates free federal protections with minimal liability for consumers. Identity theft insurance may reimburse expenses, but preventive tools, monitoring services, or credit freezes often offer better value.

Summary Table

Final Takeaway

Avoid insurance that duplicates existing coverage, offers minimal benefits, or is structured with poor value. Focus on essential protection—like auto liability, health, home/renter, life for dependents, and disability coverage—tailored to your actual risks.

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