Many insurance products are overpriced, unnecessary, or duplicate coverage you already have. The biggest offenders include extended warranties, credit card insurance, mortgage life insurance, accidental death insurance, and identity theft insurance. Eliminating unnecessary coverage can save $500-$2,000+ per year without reducing meaningful protection.
Bottom line:
Key Takeaways
- Extended warranties have a 75-80% profit margin for retailers — most are bad deals
- Credit card insurance (payment protection) costs more than the benefit it provides
- Mortgage life insurance is overpriced term life with decreasing benefits
- Accidental death insurance ignores the 95% of deaths from illness
- Many 'insurance' products are better covered by existing policies or emergency funds
Extended warranties are the single most profitable
Extended warranties are the single most profitable product retailers sell — profit margins of 75-80%. The odds of needing the warranty during the extended period are low, and most electronics and appliances either fail during the manufacturer's warranty or last well beyond the extended period.
Better alternatives: use a credit card that offers extended warranty protection (many do, free), save the warranty premiums in a 'self-insurance' fund, and buy reliable brands with strong manufacturer warranties.
Exceptions: extended warranties on used cars (from reputable providers) and AppleCare for expensive devices you're accident-prone with can provide genuine value.
Credit card payment protection
Credit card payment protection: Costs 0.85-1.35% of your balance monthly. On a $5,000 balance, that's $50-$67/month — far more than the benefit of suspended payments if you lose your job or become disabled.
Mortgage life insurance: Pays off your mortgage if you die, but benefits decrease as your mortgage balance decreases while premiums stay the same. A level term life policy provides more coverage at lower cost.
Accidental death and dismemberment (AD&D): Only pays for accidental death, which accounts for about 5% of deaths. Standard life insurance covers all causes of death at a similar price.
Flight insurance: Your existing life insurance covers death from any cause including plane crashes. Air travel is statistically the safest form of transportation.
Cancer/disease-specific insurance: Regular health insurance and disability insurance already cover cancer treatment and income loss. Disease-specific policies have narrow triggers and many exclusions.
Identity theft insurance
Identity theft insurance: Most policies mainly cover expenses related to resolving identity theft (filing paperwork, phone calls). They don't prevent theft or cover stolen money (your bank does that). Free credit monitoring from your credit card company provides most of the same alerts.
Pet insurance: Can be valuable for expensive breeds or accident-prone pets, but premiums increase with age, many conditions are excluded, and some policies cost more over a pet's lifetime than paying out of pocket. Consider a pet emergency fund instead.
Rental car insurance: Your auto insurance and credit card likely provide duplicate coverage. Check both before buying the rental company's overpriced waiver.
What You Need to Know
For small, manageable risks, self-insurance (saving money instead of paying premiums) often makes more sense. Put the money you'd spend on unnecessary insurance premiums into a dedicated savings account. Over time, this fund can cover the minor losses that these policies are designed for — and you keep the money if nothing happens.
The rule: buy insurance for catastrophic losses you can't afford to cover yourself (health, liability, home, life). Skip insurance for losses your emergency fund can handle.
How We Evaluated
Profit margin and claim rate data from Consumer Reports and state insurance department filings. Cost estimates from industry averages.Frequently Asked Questions
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Editorial Disclosure: WalletGrower may earn a commission from partner links. Our editorial content is independent and not influenced by advertisers. We research products independently and only recommend what we believe in. Updated April 2026.