Insurance products are usually advertised as a way to protect your finances while costing you less than you would pay out of pocket to handle an emergency or unfortunate situation. However, some insurance products are designed more towards increasing the profit of the company offering the insurance than towards giving consumers a necessary protection against potentially devastating loss. It can be difficult for consumers to tell whether a particular type of insurance is a good deal or a waste of money. Here are some insurance products that you should stay away from because they cost you more than they are worth.
Payment Protection Insurance
One insurance product that you should definitely stay away from is payment protection insurance. Payment protection insurance is sold by loan companies, credit card companies and their affiliates to credit card holders as a way to ensure that they would not go into default if they were unable to make payments for a period of time. However, many of these insurance policies were overly expensive and offered consumers little protection as claims were routinely denied. In recent years, many consumers have elected to file payment protection insurance claims against the companies that offered them in order to get their money back.
Overdraft protection is another type of insurance that will cost you much more than it is worth. Overdraft protection is provided by banks and is advertised as a way for the account holder to avoid the embarrassment of having a check returned or a debit card purchase denied due to insufficient funds in their account. What the account holder often fails to realize is that each instance of overcharging may trigger its own fee, leading to a $7 lunch and a $12 convenience store purchase costing the account holder around $89. It is much better to have these debit card transactions denied and to refrain from writing checks from the account unless you are certain you have enough money available to cover them.
If you have purchased electronics or appliances lately, the salesperson has probably asked you if you would like to purchase an extended warranty for the item to insure yourself against loss if something unfortunate should happen. These warranties can add hundreds of dollars to the price of the product while offering you little protection for something that is unlikely to happen. If you are really concerned about having a warranty on your new purchase, ask about the manufacturer’s warranty that is available for the item you are looking at. You may decide that it provides more than enough coverage at no additional cost.