3 Insurance Policies Most People Don't Need

Don't pay for insurance coverage that isn't really needed.

Buying insurance coverage to protect assets is extremely important. But that doesn't mean it's a good idea to buy every single insurance policy that's available for purchase. 

In fact, there are a few types of coverage that most people do not need and that are nothing more than a waste of money in the majority of circumstances.

So what are these unnecessary policies? Here are three types of insurance that it's usually a good idea to pass up. 

1. Mortgage life insurance 

Mortgage life insurance is a special type of policy that is specifically intended to make certain a home loan can be paid off upon a death. It's often marketed to people who want to ensure their loved ones don't have to move if they pass on. 

While buying this kind of protection may seem smart, the reality is that it is usually a bad purchase. The value of the policy goes down over time as people pay down their mortgage. And it doesn't provide any money for other things that family members may need upon a death. 

It's usually a far better idea to just buy a standard term life insurance policy with a large enough death benefit to cover the mortgage and also replace the policyholder's income if they pass. This can be more affordable than mortgage life insurance and the value of the death benefit will remain the same as long as the policy is in effect, rather than declining as the mortgage balance is repaid. 

2. Identity theft insurance 

Identity theft insurance covers the costs associated with dealing with identity theft. This type of policy can reimburse a victim of identity theft for any financial loss caused by having their identity stolen. It can also help pay for costs associated with recovery. 

Although this may seem like a good purchase, the reality is that the premiums you will pay for this policy year-after-year are typically more than the amount you might lose if you actually had your identity stolen. 

That's because there are a number of protections in place to ensure consumers are not responsible for fraudulent use of their credit cards or debit cards. And there are policies in place to allow individuals to get incorrect information removed from their credit record at no cost. 

Rather than paying for identity theft insurance, people should know the terms of their credit card and debit card agreements so they can report fraud right away. And they should take advantage of free resources made available by the Federal Trade Commision if they fall victim to identity theft.

3. Credit card loss prevention

Credit card loss prevention insurance is marketed to consumers with the promise it will protect against the unauthorized use of their credit cards. But the reality is that consumers are already protected and their potential liability is limited to a maximum of $50 (and many creditors limit their losses to $0).

The FTC has actually referred to this type of insurance as "worthless" and has urged people not to buy it. 

Steering clear of these three types of insurance is a best practice and consumers typically should avoid all of these policies and instead spend their money on coverage that is worth buying and that offers legitimate protection for their assets.