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Getting insurance is a wise way to protect against unexpected costs which could otherwise drain your bank account. Good coverage will help protect you and your family from financial ruin. But not all types of insurance are necessary or worthwhile-some insurance isn’t beneficial for most people, and isn’t worth the investment.

Here are three types of worthwhile insurance that most people would be wise to obtain, followed by three types of insurance that generally aren’t worth the investment.

Worthwhile: Homeowners or Renters Insurance

Getting insurance for your home is important. A storm or accident which destroys or damages your house can be catastrophic without insurance paying for the cost of repairing or replacing your possessions, so it’s important to get a good insurance policy when you are buying a house.

If you’re renting instead of buying, then purchasing renters insurance is a smart way to insure against loss. Your landlord’s insurance should pay for repairing the house or apartment, but renter’s insurance will cover your possessions should they be ruined in the case of fire, storm damage, theft, or other disasters.

Worthwhile: Life Insurance

No one likes to think about dying, but having contingency plans in place can save your family from the extra pain of legal and financial burdens. If you have spouse, children, or others in your life who would be financially impacted at your death then it’s important to have a life insurance policy. This can help replace the lost income from your job, cover the cost of childcare if you were a stay-at-home parent, cover burial and funeral expenses, pay for any death taxes, and ensure that your loved ones won’t suffer financial ruin in addition to emotional devastation.

Worthwhile: Auto Insurance

If you own a car then you’ve probably already got some auto insurance, since most states require to own at least some minimum amount of insurance for your car. But that amount typically isn’t going to be the best amount. A costly accident or breakdown could wipe out your savings and ruin your budget if your coverage isn’t sufficient, so it’s important to be realistic about what you need. Talk to your insurance agent to decide how much coverage you personally need, since your driving habits, routine, and choice of automobile should all contribute to determining the perfect amount for you.

Not Worth It: Private Mortgage Insurance

Put down a less than twenty percent down payment when purchasing your home and you’re likely to end up with private mortgage insurance on your loan. But this insurance, which you’ll likely pay for every single month, isn’t going to benefit you at all. Instead, it will only benefit your lender in the event of you not paying off the loan.

To avoid this extra monthly premium, try to put down a larger down payment. Twenty percent is a good number which will not only remove the need for private mortage insurance, but also result in lower interest payments.

http://www.consumerfinance.gov/askcfpb/122/what-is-private-mortgage-insurance.html

Not Worth It: Credit Card Fraud Liability Insurance

Here’s the deal: federal law already protects you in the event that your credit card happens to be stolen or misused. You’ll only be liable for $50, and many banks won’t even make you pay that figure if you’re willing to explain what happened and sign an affidavit verifying your story. Because of this federal protection, buying insurance to cover this very real possibility simply isn’t worthwhile. You aren’t going to be on the hook for fraudulent use of your credit card, so policies like this are essentially just a scam. Call your credit card issuer if you’re a victim of identity theft, rather than worrying about filing a claim.

Not Worth It: Accidental Death & Dismemberment Insurance

Unless you have a statistically high chance of being severely injured or killed in your job or hobbies, then this type of coverage typically isn’t going to be useful. The types of injuries and death that are covered are simply too specific to benefit most people. Instead of paying for accidental death and dismemberment insurance, it’s generally much wiser get health insurance and life insurance.