5 Kinds of Insurance That Are Usually a Waste of Your Money

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In a time when tariffs and inflation are making basic costs of living more expensive, the average consumer may be looking for places to cut back that won’t affect quality of life. One way to do this is not to spend money on insurances that cost more than their actual benefits at best and may be draining your paycheck at worst.

Kris Barber, the managing attorney for The Barber Law Firm and who specializes in insurance law and regulations, explained five types of insurance to stop buying now.

Extended Warranties

The extended warranty has become so ubiquitous it’s spawned many an internet meme: an insurance agent chasing people under water, to outer space and masquerading as character mascots just to try to sell them to you. Turns out, it’s not such a joke, Barber said.

“Extended warranties are among the worst insurance purchases consumers make seeing as the math rarely ever works in your favor,” Barber said.

Most product defects appear during the manufacturer’s warranty period, and by the time extended coverage would kick in, technology has often advanced enough that replacement makes more sense than repair.

They’re mostly sold because they’re extremely profitable to stores. “[S]tudies have determined that over half of the individuals who purchase them never even take the time to activate them,” Barber said.  

Mortgage Life Insurance

Mortgage life insurance is another one to miss, Barber said. “It’s a classic example of insurers taking advantage of homebuyers’ fears.” Instead of giving your family control over death benefits, this coverage only pays the lender.

“Credit card insurance and unemployment insurance fall into the same category — they sound protective but offer minimal real-world value for most people.”

Credit Card Loss Insurance

Credit card loss insurance is also “completely unnecessary,” Barber said. Federal law already limits your liability to $50 maximum for unauthorized charges, and most card companies don’t even collect that.

“You’re paying ongoing premiums to protect against a cost that’s already legally capped at almost nothing.”

Accidental Death and Dismemberment (AD&D) Insurance

Barber called this insurance time “absolutely redundant” for most people as “Standard life insurance provides ‘all-cause’ death benefits, meaning it pays regardless of how you die.”

AD&D only covers specific accidental circumstances and often comes with numerous exclusions that make claims difficult to collect.

Worse, Barber said, there have been many cases where AD&D policies deny claims because the death was ruled to have a medical component, even in accidents. “Why limit your family’s protection to only certain types of death when regular life insurance costs roughly the same and covers everything?”

Flight Insurance

Flight insurance is particularly problematic, Barber said. Despite occasional scary situations, commercial aviation is statistically the safest form of travel, and your existing life insurance should already cover accidental death regardless of location.

Along with that, there are other ways to cover travel issues: “Many people don’t realize their credit cards and existing policies may already provide travel-related coverage.”

Red Flags To Look For

Here are some red flags that an insurance may be unnecessary, Barber said:

• When coverage is extremely narrow or event-specific
• Statistically unlikely scenarios such as: Disease-specific insurance, accidental death policies and water line coverage
• If an insurance product only pays out under very specific circumstances, you’re probably better off with broader coverage.
• Retailers pushing extended warranties or insurance companies use high-pressure tactics — if they’re making that much money, you’re probably overpaying for minimal protection.

Consider an Emergency Fund Instead

Instead of these types of insurance, build a solid emergency fund that you can tap into when you absolutely need. “You keep control of your money, earn interest on savings and aren’t locked into specific coverage limitation,” Barber said.

Although he amended that this approach usually works best “when it comes to small appliance repairs, minor medical expenses not covered by health insurance and other costs under a few thousand dollars.”

Key Questions To Ask Before Buying Insurance

Barber recommended you ask yourself three questions before buying any insurance product:

• What’s the actual likelihood I’ll need this coverage?
• What would the out-of-pocket cost be if I had to come up with the cash?
• What does this coverage overlap with protection I already have?

Focus on Catastrophic Loss Protection

At the end of the day, Barber suggested that insurance should protect against catastrophic losses you can’t afford to self-insure.

“If you’re buying coverage for convenience or minor expenses, you’re probably wasting money that could be better saved or invested.”

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