These days, it seems as if every other TV commercial is for yet another insurance product. While consumer choice can be a good thing, not all insurance is as essential as ads make it seem.
Although insurance plays an important role in anyone's financial plan, some products might be more about protecting the insurance company's bottom line rather than yours. Insurance decisions shouldn't be made in a vacuum.
You should consider your entire financial picture. That way, you can identify the gaps and figure out the coverage you truly need, along with any you could do without. It's also important to do an annual insurance review, as certain life events or milestones can change your insurance needs.
Above all, never buy insurance hastily based on fear, especially if it involves the products on this list.
If you're renting a car in the United States, decline that additional insurance the rental car company is trying to sell you. If you already have a standard car insurance policy, it'll cover you when you're driving the rental. You don't need rental car insurance.
If you're driving abroad, you still might not need to opt into the extra coverage if you book with one of the many credit cards that cover rental car insurance.
The same might also apply to rental car reimbursement coverage. This is an optional type of car insurance that would pay for a rental car while your car is being repaired.
But if you live in a multicar household, consider whether you need rental car reimbursement coverage. It might be a hassle to borrow your spouse's or your teen's car for a few days while your car's in the shop. But the lower premium you'd enjoy by dropping that coverage could be worth it.
As risky as it might sound, there's a point at which you shouldn't bother paying for more than the minimum car insurance required by your state.
If your car is older or has otherwise lost most of its market value, you'd likely be better off dropping things such as collision insurance or comprehensive insurance.
The most your insurance company will ever pay is the current market value of your car. Meanwhile, dropping to minimum coverage could save you a thousand or more per year.
At a low enough market value, it makes more sense to pocket those premium savings than to pay for full coverage that would only ever pay a few thousand dollars.
If you've splurged on your dream vacation, you (rightly) feel as if you shouldn't expose yourself to the risk of canceled flights, closed hotels or other unexpected emergencies.
Travel insurance is a great way to make sure you'll get your money back if anything goes wrong. But, if you've got the right travel rewards card, there's a good chance you have some basic protections already.
More credit cards are offering basic trip cancellation coverage and, sometimes, even throwing in lost or damaged baggage insurance.
Depending on your trip and how you book, you might need to buy supplemental coverage for things such as medical emergencies or a cruise-specific policy if your credit card's travel insurance isn't enough. For quick weekend trips or low-cost vacations, your credit card's coverage is probably enough.
If you're still working but nearing retirement, consider whether your long-term disability insurance is worth keeping. The premium for an employer group plan typically increases with age.
The policy also will limit the payout period until a particular age, such as 65. As this age nears, your maximum possible benefit shrinks. This is especially true for someone who could have retired earlier but is still working.
If you've got a fully funded retirement, you're no longer dependent on your salary. The higher insurance bill might not be worth the dwindling maximum payout, especially if it's just protecting income you could technically live without.
A stroke, heart attack, life-threatening cancer and an organ transplant are just some of the serious health issues that critical illness insurance covers. If you develop one of these conditions, the insurer sends you a lump sum cash payment, ranging from $10,000 to $50,000, that can be spent however you want.
Despite this flexibility, it's not always as useful as it seems. Your health insurance will already put some limits on your out-of-pocket costs in these scenarios.
Before paying for this added layer of protection, review your potential out-of-pocket costs for health insurance to see whether you need critical illness insurance or if you could manage the bills with savings.
All the dysfunction and uncertainty in Washington has led to a new product: Social Security insurance. It's a type of annuity, an insurance contract that turns part of your savings into future income.
When you add this insurance to an annuity, the insurer promises your annuity payment will increase to cover any government shortfall that results in a smaller Social Security benefit.
However, the odds of that happening, at least in the near future, are slim. Retirees have strong voter turnout. More than half of the voters in 2020 and 2024 were 50 and older, and 28% were 65 and older, according to the Pew Research Center.
Cutting Social Security benefits when such a large chunk of those who turn out to vote are either collecting Social Security or planning to do so soon would be a huge risk for anyone hoping to get re-elected.
While you might be used to having them when your employer is subsidizing premiums, individual dental and vision policies might not be worth buying after you retire.
Without those employer subsidies, the cost of this coverage will skyrocket. Not only are premiums higher for individual plans, but they could also have high out-of-pocket costs for care, an exclusion of major services for the first year of coverage and a limited annual coverage limit.
Instead, you might be able to pay less per year on vision and dental costs by simply paying cash. Some providers might offer subscription plans that include all your preventive care for a low monthly price that would be lower than an insurance premium.
You can also look into alternatives such as dental savings plans, in which you get access to heavily discounted services for a low annual fee.
Say you've got term life insurance that will provide a $500,000 payout to your beneficiaries if you pass. Once you hit $500,000 in retirement savings, you can consider dropping the insurance and just designating your beneficiaries as heirs to your retirement fund.
However, if your family would need the cash right away, one benefit of life insurance is that the proceeds aren't taxable, while an inherited 401(k) is (if they withdraw it rather than rolling it into another retirement account).
If you want to drop life insurance but make sure your family receives the full $500,000 payout, you can wait to cancel your policy until your 401(k) balance is high enough that your family would receive $500,000 after taxes.
No one disputes that long-term care in the United States is an expensive risk. A private room in a nursing home costs more than $90,000 a year, on average, according to the U.S. Department of Health and Human Services.
Still, traditional long-term care insurance policies have high premiums that make them hard to justify. As you get older, those high premiums get even higher. Because it only applies under such narrow, specific circumstances, the hefty cost is usually not worthwhile.
As an alternative, you can look into a long-term care hybrid (LTC-hybrid) life insurance policy. With these policies, if you don't end up needing long-term care, your heirs will receive the cash as a death benefit instead. Your premiums aren't going to waste on a policy that never gets used.
Before buying even a hybrid policy, do the math on how much long-term care would cost. For example, some expenses, such as food, housing and utilities, would be provided by the long-term care facility.
Even when one spouse enters long-term care while the other remains in the couple's home, some daily living expenses are still reduced. If you're considering long-term care insurance, ask yourself whether you need to cover the full cost of a nursing facility or if you could go with a partial benefit that's more affordable.
Although the classic example is rental car insurance, there's often a fair amount of overlap with the insurance people have. Your car insurance covers medical bills after a car accident, but so could your health insurance.
Your home insurance covers liability for an injury on your property and so does an umbrella policy, which should offer enough supplementary coverage, if needed, to protect your net worth.
Given this overlap, it's possible that the limits on your existing policies are higher than necessary because they cover the same risk. If you have umbrella insurance, for example, drop your liability coverage on other policies to the minimum required.
While insurers usually require a certain amount of liability coverage on your home or car insurance before they'll offer an umbrella policy, there's no reason to go above that requirement.
Another sneaky way you end up paying for redundant coverage is when life events render your policy redundant. If your teen moves out for college and gets their own car insurance, for example, there's no reason you should pay the added cost of keeping them listed as a driver on your policy.
Review your insurance policies regularly and think about whether you still need the coverage for which you're paying. The money you save by slashing unnecessary premiums can go toward boosting your emergency fund or toward paying for better coverage in the areas you do need it.
