I was raised in a family that worshipped at the altar of insurance. If it costs more than $200, it better be covered by some form of insurance. Because what if it breaks? Or giant trolls break into the house and throw a kegger? But I don’t think my parents realized how much money they flushed down the toilet by insuring everything not nailed down.
Pet Insurance. We were the typical nuclear family: two parents, two kids, two neurotic but lovable dogs. Our dogs were always insured growing up, but mine aren’t. If you find a good local vet, and your pet is reasonably healthy, pet insurance is often a waste of money. Sure, he could develop a terrible disease that costs thousands of dollars in vet bills, but it’s that kind of thinking that leads to insurance overkill.
Cancer Insurance. I don’t think my parents bought this type of insurance, but it’s growing increasingly popular. This is an example of fear-based insurance overkill wherein consumers buy a policy “just in case” and insurance companies rely on their customers’ terror to sell the product. According to MSN, however, your regular health insurance should be sufficient to protect you if you are diagnosed with cancer, and the exclusions and requirements attached to this type of policy can render it not only redundant, but patently useless.
Collision Insurance. It drives my dad up the wall that I don’t carry collision insurance on my six-year-old Mazda truck. But come on! Paying more than the vehicle is actually worth every couple of years is definitely insurance overkill, especially when the payout will not put much toward a new car should I get in a devastating accident.
Unemployment and Credit Insurance. There are lots of insurance products out there to help bail you out if you are ever out of a job. Unemployment insurance will help cover your bills if you get fired, and credit insurance will make payments on loans or credit cards if you can’t make them. A better option? Avoid insurance overkill and simply put that extra money in savings. Then you’ll have it to pay your own bills if you find yourself without a source of income.
Travel Insurance. What if your plane goes down in the fields of Idaho on your way to a sunny beach vacation in Malibu? Travel insurance will pay for any medical bills you incur, canceled flights, and other incidentals you might incur on the road. But much of this insurance is redundant, and the chances of airplane failure are slim to none. If you buy this insurance every time you get on a plane, you’re significantly increasing your travel expenses with very little payoff. Instead, rely on medical insurance and a reputable travel agency that will reimburse you for cancellations beyond your control.
Risk Assessment. When insurance companies sell you a policy, they determine your premium by assessing the risk of having to pay on a claim. You should be doing the same before you buy a policy; determine the risk of having to make a claim and calculate the difference between what you’d have to pay out of pocket and what the insurance company will pay.
Take, for example, pet insurance. If you’re breeding high-end purebred puppies, an insurance policy might be worth the money because your investment is greater. But if you’ve picked up a mutt at the local animal shelter, that same policy seems extravagant.
These are just a few examples of insurance overkill, but the underlying message is the same: Don’t pay for insurance policies that don’t actually benefit you, the consumer, in a substantial way.