Insurance to Avoid

Sign with the text The Consumer Federation of America (CFA) reports in this article that many “add-on” insurances are not worth the purchase. This is because the insurance is either unnecessary or the amount you pay contains kickbacks to the seller. 

Ask yourself these questions before buying add-on insurance:

  1. Do I really need this insurance?
  2. If I do need it, do I already have this coverage in an existing insurance product such as home, health, life or auto insurance?
  3. Are there other less costly ways to get this coverage?

CFA suggests four types of insurance that you probably want to avoid or look into with more detail before purchasing. Which of these add-on insurances have you been asked to buy? Check off any that apply: 

Credit insurance or debt cancellation insurance – This pays off your debt in case of death, illness, injury or loss of job.

You may not need this if you have adequate life or other insurance to pay off debts. Typically these policies pay less than 50 percent of the premium you pay in because of kickbacks paid to the seller. 

Title insurance – This guarantees the title to a home is free from any other ownership claims. 

This type of insurance is important for the buyer, in particular, but be careful before accepting any title insurance company offered by a real estate agent, company or lender. Kickbacks may drive up the price. It’s important to shop around before purchasing title insurance. 

Travel insurance – This covers your costs in case your travel plans are interrupted.

Travel agents often are paid a commission for selling travel insurance. You may not need this if you have coverage through life insurance (in case of death) or homeowners insurance (lost luggage). 

Rental car insurance – These policies cover you if you have a collision in a rental car.

Most car insurance plans already cover you when you rent a car. Also, using your credit card to rent a car may carry coverage. Check your car insurance policy and credit card before agreeing to purchase this insurance.

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