Insurance exists to transfer catastrophic risk—the kind of loss that would derail your financial life. Yet the average U.S. household spends roughly $2,300 per year on premiums for policies that cover small, predictable expenses or duplicate coverage they already have. The insurance industry thrives on selling peace of mind, but many products are built on fear rather than math. Below are ten policies worth dropping, along with smarter alternatives that actually protect your net worth.
The collision damage waiver (CDW) offered at the rental counter costs $10–$30 per day. Over a week-long vacation, that adds $70–$210 for coverage most people already carry. Visa Signature, Mastercard World Elite, and American Express cards offer primary or secondary rental car insurance when you use the card to book the rental.
Credit card rental insurance typically excludes certain vehicle types—luxury cars, exotics, vans seating more than eight passengers, and rentals in countries like Italy and Ireland. It also usually covers only the rental period, not extensions. If you plan to rent a full-size SUV for three weeks in a high-risk country, buying the counter's liability supplement may be worth it.
Check your auto insurance policy first. Many standard policies extend comprehensive and collision coverage to rental cars. If your deductible is $500 or less, you are better off self-insuring the risk and declining the counter's CDW. For frequent renters, a standalone annual policy from Allstate or Travelers costs $80–$150 per year and covers unlimited rental days.
Retailers push extended warranties with margins exceeding 50%. For a $1,200 laptop, a three-year plan might cost $250. Yet consumer data from Consumer Reports shows that fewer than 20% of electronics purchases ever need a repair within three years. When repairs are needed, the average cost is often less than the warranty premium.
Many cards automatically double the manufacturer's warranty up to one extra year. Chase Sapphire Preferred and Citi Premier both offer this benefit. If you buy a TV with a one-year manufacturer warranty, your card adds a second year at no charge.
Set aside the money you would have spent on extended warranties into a dedicated home maintenance fund. After three years, you will likely have more cash than you would have spent on repairs. For appliances like refrigerators and washers, the manufacturer's warranty plus a one-year credit card extension covers the highest-risk period anyway.
Mortgage life insurance pays off your remaining mortgage balance if you die. It sounds responsible, but the product is overpriced and inflexible. Premiums are fixed based on the loan amount, and the payout goes directly to the lender—not your family. If you bought a $300,000 policy and owe $150,000 at death, your beneficiaries receive nothing extra.
A 20-year term life policy for $500,000 costs a 35-year-old non-smoker roughly $25 per month. That same person might pay $40 per month for mortgage life insurance with only a $200,000 benefit. Term life pays the full death benefit to your named beneficiary, who can choose how to use the funds—pay off the mortgage, cover living expenses, or invest.
AD&D pays out only if you die or lose a limb in an accident—not from illness or natural causes. Accidents account for about 6% of all deaths in the U.S., according to CDC data. Your family is far more likely to face a claim due to heart disease or cancer, which AD&D excludes entirely. Many employers bundle AD&D with life insurance for free, but buying it separately as a standalone policy is a waste.
If you want extra death protection, increase your term life policy by $50,000. The premium increase is minimal, and the coverage applies to all causes of death—accidents included.
Cancer insurance pays a lump sum if you are diagnosed with cancer. Similar critical illness policies cover heart attacks, strokes, and other conditions. These products prey on fear. The probability of filing a claim is low, and the premiums are high relative to the benefit. Insurers also deny claims at higher rates for these policies because of strict definitions—some require the cancer to be invasive or Stage II or higher.
A high-deductible health plan paired with a Health Savings Account (HSA) is a superior tool. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. If you face a cancer diagnosis, your HSA can cover copays, deductibles, and even experimental treatments. The HSA also rolls over year to year and can be invested in index funds for long-term growth.
Buying flight insurance at booking for $15–$30 per trip is almost always overkill. The odds of dying in a commercial aviation accident are roughly 1 in 11 million. Travel insurance sold as a per-trip add-on typically covers only narrow scenarios—the airline itself will often rebook you for free on a different flight if the cancellation is within their control.
An annual travel insurance policy from companies like World Nomads or Allianz costs $150–$300 per year and covers unlimited trips. It includes trip cancellation, medical evacuation, lost baggage, and rental car coverage. If you take two or more trips per year, the annual plan pays for itself.
Not all pet insurance is bad—plans with $5,000 annual limits and high deductibles are the problem. These policies cover routine vet visits and minor illnesses but leave you exposed to major emergencies. A single surgery for a dog's torn ACL can cost $4,000, quickly maxing out the limit.
Choose a pet insurance plan with unlimited annual benefits, a low deductible ($250 or less), and 90% reimbursement. Healthy Paws and Trupanion offer these features for $30–$60 per month. If you cannot afford the premium for a real policy, self-fund a pet emergency fund of $3,000 and skip the cheap plans entirely.
Banks offer payment protection plans that promise to cover your minimum payment if you lose your job or become disabled. The cost is usually $0.85–$1.10 per $100 of your outstanding balance each month. If you carry a $5,000 balance, that is $42–$55 per month—over $600 per year. The coverage only pays the minimum due, not the full payment, so your balance continues to accrue interest.
Your emergency fund is your best payment protection. Three to six months of expenses in a high-yield savings account covers your credit card bills far more reliably than an insurance product designed to profit from your anxiety.
Identity theft insurance typically covers up to $1 million in recovery costs—legal fees, lost wages, and document replacement. But most identity theft costs consumers zero dollars out of pocket. A 2023 study by the Federal Trade Commission found that the median loss from identity theft was only $200. The real damage is the time spent resolving fraud, which these policies do not cover.
You can freeze your credit at all three bureaus—Equifax, Experian, and TransUnion—for free. Credit Karma and your bank's app offer free credit monitoring. Enable two-factor authentication on financial accounts. These steps protect you better than paying $10–$20 per month for a service that mostly sends alerts you could get for free.
If your car's market value is below $5,000, collision coverage usually does not make financial sense. The annual premium might be $300–$600, and the payout after a deductible is minimal. If you total a $4,000 car with a $1,000 deductible, you receive $3,000. After two years of premiums, you have effectively paid for the payout yourself.
Apply the 10% rule: if the annual premium for collision and comprehensive exceeds 10% of the car's value, drop it. For a $4,000 car, drop the coverage if your combined premium exceeds $400 per year. Keep liability coverage to protect against lawsuits, but self-insure the physical damage risk.
Go through your insurance declarations page this month. Look for any policy with a premium above $200 per year that covers a specific, narrow risk—cancer, accident death, rental damage, or identity theft. Call your agent and cancel it. Put the savings into your emergency fund or HSA instead. Your net worth will thank you.
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