When the subject of insurance is bundled with a product or service, many of us are at a loss for what to do. Some people swear by these policies and can give you an example of when they were fortunate to have it, like when their television was fried in an electrical storm or the time they dropped their cell phone in the pool. Others will confidently tell you that they never, under any circumstances, accept supplemental insurance for any product or service. What is the right thing to do?
To mitigate risk, consumers often opt-in for coverage on consumer products despite their grossly inflated prices. One popular example is cell phone insurance. With typical rates hovering around $5 per month, many people don’t see that as a huge cost to give them peace of mind and often opt-in. The truth is, unless you can find coverage for less than a nickel a month, it’s not worth the money. After your 2-year contract, you’ll have paid $120 to protect a phone that you probably paid much less for. Cell phone insurance is also notorious for being to difficult to collect from. You’ll have to jump through every hoop imaginable often to get a refurbished phone rather than a brand new replacement. Their fine print is also ripe with coverage exemptions, which could mean you won’t even qualify for a replacement if you need one.
Computer insurance is another one that you should usually skip. The computer should already come with a normal 90-day warranty, which is when most problems will happen anyway. Another thing to consider is whether your credit card already provides supplemental insurance. Cards like American Express often insure consumer products beyond the 90-day period. If you’re worried about the computer being stolen, your Renter’s or Homeowner’s insurance should also already cover that. The rule of thumb here is that insurance is not worth it for electronics under $2,000.
Now, what about car rental insurance? Like the previous examples, this insurance is grossly marked-up and you’re probably already covered. Your personal car insurance will most likely cover the damages to a rental car, minus the deductible. In addition, your Visa or American Express card offers car rental insurance that automatically kicks in if you pay with the card and refuse their insurance.
However, there may be times where this insurance is worth the cost. In the case of overseas travel, dealing with foreign businesses in the case of accident may be more trouble than it is worth. For your time and vacation’s sake, it may be better to pass this off to the rental company even if the coverage is overpriced. After all, who wants to spend months filling out paperwork and dealing with a language barrier after an accident?
Another thing to consider is that your personal insurance can change when you leave the country. Check with your insurance agent before you travel to see what your coverage is in other countries. Unfamiliar roads and traffic can also make accidents more likely. If you want to protect your unblemished personal insurance, opting for the rental car insurance may be a practical option.
The most important thing to remember when deciding whether to get supplemental insurance is to research your coverage before you buy. Knowing all your options before you walk up to register will prevent you from being caught off-guard when asked about insurance and will allow you to make an intelligent decision that suits your needs rather than influenced through scare tactics.
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