Insurance you probably don't need

The test for any insurance product is simple: could you absorb the loss yourself? If yes, insurance is a bad trade — because every policy is priced so the insurer wins on average. That's fine when the downside is losing your house. It's a ripoff when the downside is losing a $600 dishwasher. A whole industry exists to insure small, survivable losses at enormous margins, sold at exactly the moment you're least likely to do math: the checkout counter.

Extended warranties: the checkout-counter classic

Retail extended warranties typically pay out 20–40 cents per premium dollar — the rest is commission and profit, which is why the cashier is trained to push it. Compare that to auto insurance, which pays out 60–70 cents, or health insurance, legally required to pay out 80+. Meanwhile, most credit cards already extend the manufacturer's warranty by a year for free, and modern electronics either fail immediately (covered by the standard warranty) or last for years.

Credit life and credit disability insurance

Sold alongside car loans, mortgages, and credit cards: 'this policy pays off your loan if you die or become disabled.' It's among the worst-value insurance sold in America — loss ratios are frequently below 40%, the benefit shrinks as your loan balance shrinks while premiums don't, and the payout goes to the lender, not your family. If people depend on you, a plain term life policy provides far more coverage per dollar and your beneficiaries decide what to pay off.

The rest of the skip list

• Flight insurance: dying in a plane crash is astronomically unlikely, and your existing life insurance already covers it. Pure profit for the seller.
• Cell phone insurance at $12–18/month plus a $200 deductible: over two years you'll pay $300–600 to protect against a repair that often costs about the same.
• Rental car collision coverage at the counter ($15–35/day): usually duplicated by your auto policy and your credit card. Verify once, then decline forever.
• Cancer-only and accident-only policies: they duplicate slivers of real health insurance at high margins. (Supplemental hospital-indemnity plans have narrow uses, but they're no substitute for actual coverage.)
• Identity theft insurance: a free credit freeze at all three bureaus prevents what these policies merely reimburse.
• Mortgage life insurance mailers: same product as credit life — decreasing benefit, lender as beneficiary, worse pricing than term.

The exceptions worth a second look

A few near-misses deserve nuance. Travel medical insurance for international trips is legitimately valuable — your US health plan may cover little abroad, and a medical evacuation can cost $50,000+. Trip cancellation insurance can make sense for expensive, nonrefundable trips with real cancellation risk. And AppleCare-style coverage can be defensible for a klutz-prone teenager's first phone. The pattern: insurance earns its keep only when the potential loss is genuinely painful and not already covered elsewhere.

1. Before any add-on insurance purchase, ask: could I cover this loss from savings without real pain?
2. Check what you already have: credit card benefits, auto policy, health plan, homeowner's/renter's coverage.
3. If the answer to #1 is yes and the product survives #2, decline it and move the premium to your emergency fund.

The bottom line

Buy insurance for catastrophes, self-insure the inconveniences. Extended warranties, credit life, flight insurance, and their cousins all insure losses you could shrug off, at prices that guarantee you lose on average. Redirect those premiums to an emergency fund and you become your own warranty company — with a 100% loss ratio paid entirely to yourself.

Loss ratios: the number that exposes everything

A loss ratio is the share of premium dollars an insurer pays back out in claims. It is the single most honest number in the industry, and it varies wildly by product. Health insurers are legally required to pay out at least 80 cents per premium dollar; the junk products on the skip list often pay out less than half that. When you see a loss ratio below 50%, you are not buying risk transfer — you are buying a lottery ticket with the odds printed on the back (estimates from regulatory filings and industry studies):

This chart is the whole article in one picture. The products at the top are priced by fierce competition and regulation; the products at the bottom are priced by the psychology of the checkout moment. A useful habit: before buying any niche coverage, search the product name plus 'loss ratio.' If the number you find is below 50%, the seller's enthusiasm is explained, and your decision is made. And remember the flip side — a low loss ratio doesn't mean claims never pay, it means that on average, across everyone who buys, most of the money simply never comes back.

One last defense worth naming: precommitment. Decide your policy on add-on insurance once, in a calm moment — 'I decline all point-of-sale coverage under $10,000 of exposure' is a perfectly good rule — and then the checkout pitch stops being a decision at all. The sellers' entire edge is catching you mid-transaction without a framework; a rule you wrote for yourself in advance removes the edge permanently, no math required at the register.