By Jeanette Pavini
SAN FRANCISCO (MarketWatch)—Julie Baumann, who lives in the San Francisco Bay area, knows all too well that just because you have insurance, it doesn't mean you are covered. After years of paying high annual premiums for pet insurance she filed a claim for surgery on her Bernese Mountain Dog. To her surprise, she was told the surgery wasn't covered and she would be stuck with the $6,000 bill.
Baumann isn't alone. Millions of consumers file claims every year against a wide variety of policies only to find the money they spent on insurance premiums was virtually thrown away. Americans spend more than $1.1 trillion on insurance premiums a year according to the Insurance Information Institute. So, with offers of everything from insurance for your wedding day and your cat to your identity, what is worth your hard earned cash and what's not?
Skip this:
Pet insurance: Considering all the restrictions on most pet insurance policies you'd probably be better off setting aside money every year for your pet's health care. In addition to premiums, you also have the responsibility of copays, medications and deductibles, which quickly add up. Plus, with most plans, the premiums rise and coverage declines as your pet gets older—when they are more likely to need costly procedures.
Home warranty: This covers major appliances and some other assets such as wiring and plumbing. Unless you are buying a home with old appliances and you are unsure about the electrical work, you're probably better off setting money aside for home repairs in the event something does break. Also, with these policies you still may be responsible for deductibles, service charges and proof of non-neglect.
Extended warranties for electronics: When you buy electronics, the salesperson will always offer you an extended warranty. Usually the only time this is worth it is if you are buying an expensive product that's new to the market or the technology of which is entirely new. If you do opt for this additional coverage you should not pay more than 10% of the purchase price for the warranty insurance. And besides, if you purchase a high-end product from a quality manufacturer, it comes with some warranty anyway.
Mobile phone insurance: The $7 or so you pay monthly adds up, and if you have to replace a more expensive phone, like a smartphone, you're probably looking at a hefty deductible and the phone you get as a replacement from the insurance carrier will almost certainly be a refurbished one, not a new one. If you have an expensive smartphone, it may be worth having this coverage if you travel a lot. Or, it could be worthwhile for your children's phones, if they're prone to losing or damaging them. But you're probably better off saving older devices you can reactivate.
ID theft insurance: Having your identity stolen is nothing short of a big, messy headache. But in most cases you won't have to pay for it, thanks to federal consumer protection laws. For complete information, check out the Federal Trade Commission's ID theft info at www.ftc.gov/ .
Flight insurance: This isn't travel insurance; it only pays out if your flight crashes. It really isn't necessary if you already have life insurance, and even if you don't have life insurance, the odds of this kind of risk are so low as to make the expense unreasonable.
Wedding insurance: Your credit card company may already cover most services covered through a wedding insurance policy. Just make sure you put all deposits for services such as catering or photography on your credit card; don't pay by cash or check. For stolen or lost property such as rings or gifts, your homeowners or renters insurance may cover this.
Maybe you need this:
Travelers insurance: This can pay off but read the fine print carefully, especially if you have a health condition. If you cancel your trip due to a health problem, you may have to prove it wasn't because of a pre-existing condition. Before buying traveler's insurance, check with your credit card company to see if they offer coverage for travel when expenses are charged to their card.
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Medical insurance is a must. If you can't afford full coverage, opt for at least catastrophic coverage. Raise your deductibles to lower your premiums. Non-coverage for the medical expenses associated with catastrophic care is one of the leading reasons people need to file bankruptcy.
Auto insurance isn't only necessary, but also required by law. If you need to lower your premiums, consider raising your deductibles. If your car isn't worth insuring, you may want to have only collision that covers the other driver's vehicle.
Umbrella insurance is inexpensive, considering the protection these policies offer. Umbrella insurance gives you additional coverage on your underlying homeowners and auto policies. It picks up where the other policies end; giving you higher protection in the event you are sued and liable. Most umbrella policies are about $25 a month for a million dollars in coverage.
Renters insurance: This little policy offers a big bang for the buck. Not only do they cover theft or loss from a fire or some other types of disaster, they may include liability coverage or cover items stolen or lost outside the home. Plus, they're affordable, typically $250 a year.
How to get the best insurance coverage:
Read the fine print and ask questions. You need to be aware of any loopholes and exclusions.
Check to see if your credit card company protects and covers you in a way similar to an insurance policy.
Always buy insurance from licensed agents or companies. You can check their status through your state's insurance commissioner's office.
If you have several policies, you may be able to get a multiple policy discount if you go through one insurer.
Emmy Award-winning broadcast journalist, documentarian and author Jeanette Pavini covers consumer and investigative news for numerous publications, radio and television. Jeanette is based in the San Francisco Bay Area.
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