Buying Insurance

Lesson 8: How To Be A Savvy Insurance Buyer

Insurance Not To Buy

1.It may seem peculiar to be advised not to buy insurance. But the fact is that certain kinds of insurance, or insurance with very narrow or punitive restrictions, or insurance that duplicates coverages you already have, are simply not a good buy. Some examples are noted in the "Buyer Beware" sections of the individual lessons.

2.One of the situations you will most frequently confront is the Collision Damage Waiver (CDW) offered when you rent a car. Strictly speaking, this is not insurance. The rental car company is "waiving" its right to sue you if the rental car is damaged. Moreover, the CDW is full of restrictions. Your better option is to decline and rely on your own auto insurance for coverage. (Buyer Beware: your own auto insurance will offer coverage for the rental car only if you have Collision and Comprehensive (see Lesson 2) on at least one of the autos on your policy.) However, in all cases it is best to consult with your agent to learn exactly how your auto policy will apply.

3.Another loser is the accidental death insurance you can purchase through a vending machine at the airport. This policy pays only if you die in a plane crash in the next day or two. This is an example of what Hungelmann calls "Las Vegas Insurance."

4.Accident insurance is another typical example of insurance that pays only as the result of a very limited cause of loss. The better alternative is major medical insurance. It costs a little more, but it covers a whole lot more, including accidental injuries.

5. There are many other such "insurance" policies. The basic rule is: don't buy insurance that transfers only part of the risk and only under very limited conditions. Don't buy insurance that duplicates coverages under other policies you may already have. Finally, when you consider buying any insurance, consult with your agent to determine if there is another, and better, alternative.

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