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Which is a type of insurance to avoid?

While insurance can be a valuable tool for managing risk and providing financial protection, not all insurance products are equally beneficial. Some types of insurance may offer limited value or be unnecessary for certain individuals. Here are some types of insurance you might consider avoiding or at least scrutinizing carefully


1. Credit Card Insurance

  • Description: Insurance that covers your credit card payments if you become unable to pay due to illness, job loss, or disability.
  • Why Avoid: These policies are often expensive relative to the benefits they provide. Additionally, many people already have other types of insurance, such as disability or life insurance, that can cover these scenarios.

2. Extended Warranties

  • Description: Insurance that extends the warranty period for consumer goods beyond the manufacturer’s warranty.
  • Why Avoid: Extended warranties often overlap with the coverage provided by the manufacturer’s warranty and credit card protections. The cost of these warranties can be high compared to the actual benefit, especially given the low likelihood of needing expensive repairs.

3. Flight Insurance

  • Description: Insurance that provides coverage for accidents or injuries that occur during a flight.
  • Why Avoid: The risk of such events is extremely low, and many people already have life insurance or travel insurance policies that cover these risks.

4. Cancer Insurance

  • Description: A policy specifically designed to cover cancer-related expenses.
  • Why Avoid: Comprehensive health insurance policies often cover cancer treatment, making specialized cancer insurance redundant. Moreover, it’s better to invest in broader critical illness policies that cover a wider range of diseases.

5. Mortgage Life Insurance

  • Description: Insurance that pays off your mortgage if you die.
  • Why Avoid: Term life insurance can provide the same benefit (and more) often at a lower cost. Term life insurance also offers more flexibility, as the beneficiary can use the payout for any purpose.

6. Accidental Death and Dismemberment (AD&D) Insurance

  • Description: Insurance that pays out if you die or lose a limb in an accident.
  • Why Avoid: The coverage is very specific and limited. Regular life insurance and disability insurance typically provide more comprehensive coverage.

7. Identity Theft Insurance

  • Description: Insurance that covers expenses related to recovering from identity theft.
  • Why Avoid: Many of the benefits offered by identity theft insurance, such as credit monitoring and identity recovery services, can be obtained for free or at a lower cost through other services. Additionally, financial institutions often have protections in place to help recover stolen funds.

8. Pet Insurance with Limited Coverage

  • Description: Pet insurance policies that offer very limited coverage or have high premiums relative to the benefits.
  • Why Avoid: Some pet insurance plans provide minimal benefits and have numerous exclusions. It’s essential to carefully compare pet insurance plans and read the fine print to ensure they offer adequate coverage.


When considering whether to purchase a particular type of insurance, it’s essential to evaluate the cost relative to the potential benefits, as well as whether the coverage overlaps with existing policies. Consulting with a financial advisor or insurance professional can help you make informed decisions and avoid paying for unnecessary or redundant insurance products.


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