Insurance is a useful tool to cover risks, if applied wisely. If not, then it is the equivalent of throwing your money away. Even worse than throwing your money away, these frivolous insurance policies can leave you with a false sense of security.
Less useful policies tend to offer very narrow single-purpose coverage, overlap with existing insurance policies, or have virtually non-existent chances of occurring (such as the proverbial tidal wave insurance in Kansas). Here are five examples:
Life Insurance For Children – From a payout standpoint, it does not make much sense to buy life insurance for your child. There are no dependents that require support or assets to protect for heirs.The only reason to buy life insurance for a child would be a whole life policy that your child can take over when they come of age. Then, later in life, he or she will probably be able to pay the premiums out of the built-up cash value. Even so, there are more cost-efficient ways to handle life insurance coverage.
Credit Card Insurance – Your liability is already limited by Federal Law to $50 for theft and fraudulent use of your credit card. Other types of credit card insurance pay off your bill in case of death or disability, replace damaged or stolen items purchased with the card, and cover your minimum payments for some time in case of job layoff. These usually come with restrictions that make claims difficult to file, and are often covered under different kinds of insurance.
Besides, your money is better spent applied to paying down your card balance – although it is best never to charge more than you can pay at the end of the month anyway. Credit experts advise that you stay under a 30% credit card "utilization rate" to keep your score high. You can check your credit utilization for free with
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Make sure you know what you want to do before you arrive at the counter, because your fatigue could be worse on the next trip.
The only reason to buy optional insurance is to be compensated if a worst-case scenario occurs. Make sure that the insurance you’re paying for will pay you at the end.
