We are inundated with ads and sale pitches about insurances we need on a daily basis. Insurance, if bought carefully is a great product that can protect us from financial catastrophe. However, just as there are good insurance products in the market, there are just as many, if not more bad products that you should avoid.
In this blog post I want to talk to you about three insurances that you really shouldn’t buy.
1) Extended Warranties or Service Contracts
When you’ve ever purchased a large refrigerator or microwave at a big retail store, oftentimes the salespeople have pushed on these extended warranties or service contracts upon you.
They talk about how good these deals are and if you try to fix it yourself, it would cost you thousands of dollars out-of-pocket.
If you’re caught off guard it makes you think for a bit…
Hmmm… protect my thousand dollar purchase with this twenty dollars warranty?
It could make sense. But I want to tell you – don’t get intimidated by their sales tactics. Most often times these are a really bad deal for you and it only benefits the retail store. Companies will never share their numbers but these service contracts are ridiculous profit centers.
Most appliances like refrigerators, microwaves or even your computers last so long that most people who’ve purchased these extended warranties have forgotten that they’ve got them in the first place. Most people don’t know this but a lot of these purchases already include a warranty that comes with the manufacturer.
And in a very rare case that your appliance stops working within its first year, you’re better off just to paying out of pocket or buying a new one.
2) Rental Car Insurance
Number two insurance that you shouldn’t purchase is rental car collision insurance.
if you ever rented a car, you’ve probably been asked if you wanted to purchase the lost damage waiver. This is just a fancy name for collision car insurance. You should decline because most often times you already have collision coverage without you even knowing it.
Two common sources:
One, if you’ve ever rented your car with a travel credit card, your credit card agreement automatically protects you with collision coverage. Make sure you read the fine print to confirm but this is one of the reasons why I use my Chase Reserve for all my car rental.
A second common source for a collision coverage is your current car insurance. If you already have collision coverage at your car at home, oftentimes these extend to rentals. I didn’t even realize this until my car insurance company told me this. Now make sure you call and verify but this is another reason why you shouldn’t pay for an additional coverage.
3) Smartphone Insurance
Third insurance that you don’t need and my favorite, is smartphone insurance.
You see this being sold to you whenever you’re about to upgrade your phone or you’re about to buy a new phone. Given how expensive phones have gotten these days it does make you think for a bit.
Most recently when I was upgrading my wife’s phone, they were selling this for about $8 a month and for just $8 a month you might think it’s a steal to protect your thousand dollar investment, right?
I’ve seen most carriers charge anywhere between $5 to $10 dollars for these products. However, like the other insurances that you shouldn’t buy, check yourself. You might think $10 a month is nothing to protect my thousand dollar phone, however a lot of times what we don’t do is analyze these costs over a longer time period.
$10 over a span of two years is actually $240!
And oftentimes you have to pay a deductible of up to about a $100 before the repair company will do anything.
Given how quickly phone depreciates, do you want to spend $300 on the phone that’s probably not even worth that much?
Just to give you an example, I just recently sold my wife’s iPhone 6’s that I bought for $600 two years ago for less than $70.
That’s slightly more than 10% of the original price!
You’re just better off investing in a good phone case. My family, we use the Spigen brand, but anything will do – it’s pretty cheap these days.
Do you agree with my list of insurance that you shouldn’t buy?