Are You Over-Insured?

By Eric Fox | March 03, 2011 AAA
Are You Over-Insured?

One of the ironies of modern life in the United States is that we live in one of the safest countries in the world, and yet we have the most insurance to cover the relatively small amount of risk we face. This is demonstrated by the number of overlapping insurance policies that many people inadvertently carry. Many of these overlapping policies can be eliminated to free up funds for savings or other uses. (For a related reading, check out Is Your Insurance Company Going Belly Up?)

Tutorial: Intro To Insurance

Group vs. Individual Life Insurance
Many individuals have a life insurance policy to protect their family from financial loss if they should die, with the proceeds from these policies used to pay off debt and cover lost income. Products offered include term life or more permanent coverage like whole or universal life.

Some employers also offer life insurance coverage to their employees through group term life insurance policies. These group policies have some advantages over policies bought directly by an individual. They are usually less costly because the risk is spread out over a large base of workers, and the employer sometimes subsidizes part of the premium as part of a benefit package. Also, there are typically no medical exams needed to get coverage under these group life policies.

While these group policies are relatively small and only pay a multiple of two or three times an employee's salary in the case of death, this may be enough to protect a family from financial loss, especially when combined with another outside life insurance policy. An individual can therefore reduce coverage under an existing individual policy with the proceeds from the group policy making up the difference. (For more, see How Much Life Insurance Should You Carry?)

Emergency Road Service
Auto insurance policies may offer emergency road service if an insured vehicle breaks down. This coverage provides an individual with flat tire repair, a battery boost and other minor mechanical repairs to get your car operational. Other benefits include lockout service and even limited fuel delivery to get you home if you run out of gas. If the vehicle can't be repaired the towing service is provided as well.

Yet many individuals pay a yearly fee to belong to organizations like AAA or the National Automobile Club, which provide many of the same services. Check the benefits and costs of your emergency road service provided by your insurer and compare it that offered by motor clubs you may belong to. It's very possible that both aren't needed.

Tutorial: Investing For Safety And Income

Rental Cars
When renting a vehicle while on vacation travel, most renters are presented with a confusing choice of options by the rental car company that if selected, exclude the renter from liability if there is damage to the vehicle. These waivers tend to be quite expensive and can increase the daily rental rate substantially. These options are usually accompanied by an ominous warning from the stern faced clerk behind the counter about the liability you will face if you don't pay for this coverage.

Some of this same coverage may be provided by a renter's personal auto insurance policy depending on the level of coverage that you selected when you signed up. The best course of action for a consumer to follow is to examine your policy thoroughly several days prior to renting. If there is any confusing language in the policy then call your agent and get an explanation.

Compare this coverage to the offerings from the company you are renting from. Most rental car companies have detailed information posted on line regarding damage waivers and other options offered. The worst possible thing to do is to wait until the day of the rental when you are standing at the counter.

Some credit card companies offer limited coverage on damage to rental cars as well as long as you use that credit card to rent. This coverage is sometimes secondary or excess to your main policy but is something else that also should be checked several days prior to renting. (For more, check out 5 Insurance Add-Ons You Don't (Always) Need.)

Warranties
Consumers are sometimes pressured by retailers at the point of sale to purchase an extended warranty on a product. This warranty is designed to extend the manufacturer's warranty past the standard time of 90 or 180 days. These are typically expensive with the cost based on the purchase price of the product and the length of the extension.

Many consumers don't need an extended warranty as some credit card companies also offer extended warranties on products purchased with their cards. American Express offers an extended warranty at no extra charge to its cardholders, with the benefit doubling the time of the manufacturer's warranty up to a maximum of one year.

Visa signature cardholders can extend manufacturer warranties by registering a product with the company's Warranty Manager Service. The company also offers further extension of warranties for an extra fee. (For more, see Extended Warranties: Should You Take The Bait?)

Bottom Line
Many consumers have overlapping insurance policies that provide duplicate coverage on a variety of risks. A careful review of existing policies can lead to a cancellation of this duplicate coverage and save a consumer a considerable amount of money in the long term.

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