money

Stay Safe & Save: 6 Types of Insurance That Waste Your Money

Jill Huettich

WealthFit Contributor

We know your insurance makes you feel safe. But does it save you money? Don’t worry! Figuring out which insurance policies are wasting your money will let you rest easy knowing that you AND your wallet are safe.

Wanna stop wasting money?

Then you need to take a hard look at what you’re spending on insurance. Many Americans waste hundreds—if not thousands—of dollars buying insurance that they either don’t need or that offers such little coverage, it’s a bad bet.

Keep reading to find out which insurance policies aren’t worth the expense.

1. Rental Car Insurance

Rental car insurance is a waste of money for most people. That’s because the car insurance coverage you carry likely already protects you in the event of an accident. However, there’s an important caveat—you must have collision coverage.

But what if you don’t have personal auto insurance? Chances are you’re still protected if you use a major credit card to secure your rental.

For instance, American Express, Discover, MasterCard, and Visa typically provide rental car insurance benefits if you decline the car insurance coverage offered at the rental company. However, some restrictions may apply, so definitely check with your credit card company before you travel.

Potential Savings: If you travel 2 weeks a year and pay $25/day for 14 days of rental car insurance, you’ll save $350.

2. Collision Insurance

As a quick refresher, there are two main types of car insurance: collision and comprehensive. Collision insurance covers accidents that occur while you’re driving. Comprehensive insurance covers damage to your car when it’s stationary, like theft, vandalism, hail, etc.

If you drive an older car, it’s a good idea to get rid of your collision coverage. Allow us to explain. Let’s say you have a car that’s worth $2,500, and you have a $1,000 deductible.

If you get into an accident, your insurance company will give you $1,500—at most— to repair or replace your vehicle. And mind you, your insurance policy won’t even kick in unless you get into a big accident—one that costs over $1,000 in damage.

So, you could be spending $200/year or more paying for collision insurance that offers very little benefit. A better idea is to set some money aside should the worst occur—then, you’ll be prepared regardless.

Potential Savings: While collision insurance costs vary, based on your car’s Kelley Blue Book Value and deductible, you can expect to save $100-$300/year by ditching collision coverage on an older car.

3. Personal Injury Protection

Personal injury protection is one of the various types of auto insurance coverage you’ll come across when you shop around for an auto insurance policy. Personal injury insurance provides medical payments coverage to you and other passengers in your car if you’re in an accident.

This insurance may be unnecessary if you rarely have passengers in your car and already have great health and disability insurance from your employer—then your medical expenses will be covered anyway.

However, keep in mind that personal injury protection is a legal requirement for residents of some states. Check to find out if that’s the case in your state before ditching your coverage.

Potential Savings: Varies, although on average, you’ll probably save $50-$100/year.

4. Comprehensive Coverage

In addition to collision coverage, you also might want to drop comprehensive coverage on an older car. To determine whether it makes financial sense for you to do so, try the 10% rule of thumb.

For example, let’s say you have a car worth $4,000 with a $1,000 deductible. Should your car be damaged beyond repair, you’ll get $3,000 from your insurance company. If you’re paying more than 10% of that amount ($300) annually for that coverage, you probably should get rid of it.

In fact, with an older car, you might just want to carry liability insurance. Liability coverage means that if you’re at-fault in an accident, other people’s bodily injuries and property damage will be covered by your insurance.

You’re actually required by law to carry liability insurance, but if you drive an older vehicle, that might be the only type of insurance coverage you need.

Potential Savings: The average person pays $22/month for comprehensive coverage. For an older car, that figure is probably closer to $15/month, so you can expect to save approximately $180/year.

5. Comprehensive Travel Insurance

This type of insurance covers lost bags, reimbursements for missing connections, medical and dental emergencies while you’re on vacation, and disaster evacuations. While comprehensive travel insurance is a good idea if you’re traveling internationally, it’s not worth it for domestic travel.

Additionally, many credit cards offer travel insurance as a perk. For instance, Chase Sapphire Preferred, Citi Prestige, and Citi ThankYou all offer some type of trip cancellation protection. So, before plunking down your hard-earned money on travel insurance, check to see what type of trip coverage your credit cards offer.

Potential Savings: Travel insurance typically costs 5-7% of your total trip cost. So, if you have a $2,000 trip planned, you can expect to save anywhere between $100-$140.

6. Pet Insurance

We all adore our pets, so it can be difficult to imagine not protecting their health with pet insurance. However, in most cases you’ll find that the cost of your pet insurance premiums is more than what you’ll spend out-of-pocket on your pet’s health care.

For instance, Consumer Reports looked at nine pet policies for Roxy, a healthy 10-year-old beagle. They found that over the course of Roxy’s life, her vet bills had totaled $7,026.

The premiums for all nine insurance companies cost more than that figure. Even when Consumer Reports boosted Roxy’s hypothetical medical problems to $12,685, only five of the policies would have paid out more than they cost.

So, if you’re good at putting money aside and saving for a rainy day, pet insurance isn’t worth the expense. You’re better off setting aside a few hundred dollars each year for pet-related emergencies.

If, on the other hand, you don’t have a good track record with money, you may find it worth your while to pay for pet insurance. Then if your pet experiences an unexpected health problem, you can get it the medical care it needs.

Potential Savings: Pet insurance isn’t cheap. On average, accident and illness coverage costs $400-$500/year for dogs and $250-$300/year for cats.

Aim for the Minimum and Don’t Waste Money  

Our philosophy is this—you should always buy the minimum amount of insurance you need to sleep well at night. Doing that will save you hundreds, if not thousands of dollars, over the course of a year.

Are you ready to start saving?

If you’d like to cut your insurance costs right away, here are two easy things you should review:

  1. Your Auto Insurance Policy
  2. Insurance Coverage Offered by Your Credit Cards

By checking these two things, you’ll be in the best position to stop spending money on unnecessary insurance and start putting it toward your savings instead!

Share

Written By

Jill Huettich

With an MBA in Marketing and a Digital Marketing Strategies certification, Jill Huettich frequently writes about marketing, entrepreneurship and wealth-building strategies.

Read more about Jill

RELATED TRAINING

 in 

MONEY

article
7 Easy Ways to Build Your Credit Score

Here are 7 important ways to raise your credit score to new heights. Use these credit tactics to go from zero to hero.

7 Easy Ways to Build Your Credit Score

Jill Huettich

Read Now
article
Give Back & Get Back: How to Maximize Your Charity Tax Deductible Donation

Learn how donations can reduce your taxes, how tax laws affect charitable tax deductions, and what you can do to maximize during tax time.

Give Back & Get Back: How to Maximize Your Charity Tax Deductible Donation

Jill Huettich

Read Now
article
Do You Have the Best 401(k) Plan? Double-Check Your Fees ...

If you don’t know what your 401(k) fees are, you’re probably leaving money on the table. Don’t let the fees kill your nest egg.

Do You Have the Best 401(k) Plan? Double-Check Your Fees ...

Jill Huettich

Read Now
article
Pack Your Lunch, Pack Your Wallet: How To Save Money on Lunch at Work

Packing your lunch is an easy way to save thousands a year. Learn how to start packing your lunch and stick with it.

Pack Your Lunch, Pack Your Wallet: How To Save Money on Lunch at Work

Jill Huettich

Read Now
article
Are You a Restaurant Server? Here's How To Budget When You Work for Tips

Learn how to budget when you work for tips. How to take control of your finances in the service industry.

Are You a Restaurant Server? Here's How To Budget When You Work for Tips

Jill Huettich

Read Now
article
Sitting At Home? Get a Financial Education Today — For Free

If you’re staying at home to help stop the spread of Coronavirus, or Covid-19, chances are you’ve already filled your time with movies and games. Why not use this time to learn about money? 

Sitting At Home? Get a Financial Education Today — For Free

Cash Lambert

Read Now
article
4 Ways To Conserve Your Money During the Coronavirus Crisis

Follow this simple 4-step process to spend less and save money during the coronavirus pandemic. Plus, pick from our list of 101 side hustles to boost your income.

4 Ways To Conserve Your Money During the Coronavirus Crisis

Cash Lambert

Read Now
podcast
How To Get Rid of Student Loans

What if you could get rid of your student loans entirely? In this episode, Dustin sits with Travis Hornsby, Founder of the Student Loan Planner, to discuss the best repayment options, perks of refinancing , how to save thousands of dollars in the long term.

How To Get Rid of Student Loans

article
How To Graduate Debt Free

Learn how to graduate with NO student debt by thoroughly researching a career, winning free money, and picking a major with a high ROI.

How To Graduate Debt Free

Erica Gellerman

Read Now
More Cashflow, Less Stress

More Cashflow, Less Stress

How To Boost Your Monthly Income By "Going With the Flow" of Wealth

Dale Gibbons

Watch Now
Financial Adulting

Financial Adulting

The 20-Something's Guide to Debt, Investing, and a Wealthy Life

Ellen & Micah Long

Watch Now
Zero Student Debt

Zero Student Debt

How To Make a Smart College Investment and Graduate Debt-Free

Ellen Long

Watch Now
podcast
unHustling - Work Less, Earn More

Join Phil Newton as he and Dustin discuss how to de-stress your life and achieve work-life balance while increasing your income.

unHustling - Work Less, Earn More

Money 101 for Teens

Money 101 for Teens

The Ultimate Guide To Making, Spending, Saving, and Investing Money

JP Servideo

Watch Now
podcast
Tax-Free Wealth

Learn how to legally reduce your taxes by 10%-40% & how to deal with financial advisors from Rich Dad Advisor and wealth education innovator Tom Wheelwright.

Tax-Free Wealth

podcast
Wealth Acceleration

Learn how Stuart Arakelian recovered and prospered from the 2008 financial crash—and how it impacted his philosophy on wealth management.

Wealth Acceleration

Wealth That Lasts

Wealth That Lasts

Simple Secrets to Getting (and Staying) Wealthy

Tom McFie

Watch Now
Getting Out of Debt

Getting Out of Debt

How To Eliminate (Bad) Debt and Maximize Your Cash Flow

Michele & John McFie

Watch Now
Wealth-Building 101

Wealth-Building 101

How to Get Out of Debt, Boost Your Active Income, and Start Investing for Passive Income

Andy Proper

Watch Now
podcast
Timely Tax Benefits, Wealth Preservation & Leverage

Preserve your hard-earned wealth. Learn to use tax advantages to your benefit and leverage trusts with Supreme Court Counselor Lee Phillips.

Timely Tax Benefits, Wealth Preservation & Leverage

podcast
Cutting the Cable

What’s the cable cutting movement all about? Cable Cutting Academy's Jeremy Edmonds discusses tech and finance hacks to save you money.

Cutting the Cable

podcast
How To Negotiate a Higher Salary

Want to boost your salary? Rich Jones and Marcus Garrett help you determine your financial worth. Negotiate for the life you deserve.

How To Negotiate a Higher Salary

podcast
How To Break Through Your Financial Ceiling

Why you MUST take your financial education seriously. Andy Tanner on how to become financially literate, and truly balance your portfolio.

How To Break Through Your Financial Ceiling

The Hidden Power of Life Insurance

The Hidden Power of Life Insurance

How to Protect Your Ass(ets), Save Smarter, and Start Putting Your Money to Work

Stuart Arakelian

Watch Now