Catastrophic and comprehensive are the two C's of insurance on clarkhoward.com

RIP-OFF ALERT: It doesn't matter where you go, or what you're buying, you're almost certain to be pitched on an extended warranty or protection plan during checkout.

Clark took his daughter to a Black Friday sale for new tennis shoes...and got the pitch for a "tennis shoe protection plan." Outrageous!

In a recent SmartMoney magazine story, the CEO of Best Buy was talking about how sales of warranties are declining. The big box store is now re-evaluating how much they charge for extended warranties in the hopes that more people will buy them. But consumers are getting increasingly savvy and know they're a rip-off.

Clark's rule of thumb is as follows: Never insure something that won't break your bank if it breaks. Insurance should only be for catastrophic things.

Put another way, remember the "two C's rule" from Bob Hunter of the Consumer Federation of America: Only buy insurance that protects you in the event of catastrophe and be sure it's comprehensive.

For example, homeowners insurance (or renters insurance), auto insurance, life insurance and disability insurance are all examples of good insurance to have.

Bad insurance, however, includes so-called "croak and choke" insurance on credit card debt. It only serves to cover the bank if you die with outstanding bills.

Likewise, mortgage life insurance is garbage. It costs 10 times what it should on your life. And here's the punchline: It insures the bank again! They get money at the time of your death and you paid the premiums all the while!

Finally, one nuance about auto insurance to note: If you have an older car (aka a "beater" car) and the annual cost of collision and/or comprehensive insurance is greater than 10 percent of the car's value, you'd be better forgetting about collision and comprehensive and only having liability coverage.

What others are saying

Cell phone insurance
I bought a new iPhone4 a couple weeks ago, thinking it would be covered under our existing AT&T phone insurance, which costs $4.99/mo. Received a letter saying it was no longer covered, but insurance was available from Asurion's MobileProtect plan for $11.99/mo. with a $199 deductible! Ridiculous! After checking around I found three companies that offer a better deal: SquareTrade, Worth Ave. Group and GoCare. I'm going with SquareTrade for $99 for two years' coverage against breakage and electronic failure. Deductible is only $50!
By NickB @ 08/06/10 10:19:50 AMreport abuse
Health Insurance
I am a life and health agent and believe that the high deductible plans are good to have. Some that I offer have a number of doctor visits for a small copay and then a high deductible which keeps your monthly premium affordable. Better to be safe than sorry!
By James Flournoy @ 08/04/10 09:39:58 PMreport abuse
Flood Insurance and Wind and Hail
I am located in a flood plain, however, the elevation on my property indicates my prop not subject since I am 20 ft above a tidewater tributary...I do presently have it for my son-in-law's comfort! Wind and hail insurance in the coastal area is exorbitant and being "older" and on fixed income will likely have to sell and move because of it.
By Pat Carterette-Hardee @ 08/03/10 11:44:46 AMreport abuse
Collision insurance
We have '95 and '99 Explorers with low mileage. Although the Blue Book is pathetic both are in excellent shape. We have both been hit by uninsured motorists and found collision insurance was a very cheep way to have them pursue the other drivers successfully.
By Rebecca @ 08/02/10 06:26:44 PMreport abuse
Insurance on retail items
In general I agree that it's not worth buying warranties on retail items but I've come out ahead twice with extended warranties on computers. I've had motherboard failures on 2 computers that were covered by 3- or 4-year contracts that I paid about $29-49 for. Both times I got new computers that were better and faster than the original ones when repairs would have cost almost as much as a new computer. So I wouldn't say NEVER buy one.
By Randy @ 08/02/10 06:12:07 PMreport abuse
flood insurance
If you do not live in a flood zone and the insurance is dirt cheap. I pay $356 a year for maximum coverage. I may never use it, but if a hurricane comes my way I sleep better knowing I have it. It's a no brainer and falls under the "2 C's"
By bryan @ 08/02/10 05:27:56 PMreport abuse
umbrella
Do you need to have collision if you have an umbrella plan?
By Mary @ 08/02/10 05:14:51 PMreport abuse
Health Insurance
I'm also self employed, a similar age, and only pay $60 a month for truly catastrophic coverage with a $7,500 deductible. I figure a $7,500 bill is a lot better than bankruptcy if something terrible happens.
By Gabe @ 08/02/10 02:59:11 PMreport abuse
Insurance on retail items
I absolutely agree with Clark on this - don't EVER buy it. It's nearly 100% of the time a losing gamble for the following reasons. First off, most items don't break in the first few years. Secondarily, if it does break, the repair is likely less than the warranty would have cost anyway. Finally, read the fine print on these warranties BEFORE you buy them. Two biggies to watch out for, obviously read the exclusions and look for ridiculous rules, like a camera warranty that won't cover a repair if they find a grain of sand in it. And then look for what they replace it with if they can't repair it, odds are that they'll give you a refurbished model as a replacement. Check online to find what your item goes for used, again, odds are that it's less than the warranty anyway so even if it "pays off" you still lost money.
By Gabe @ 08/02/10 02:55:36 PMreport abuse
Cell phone insurance
Cell phone insurance is similar on a computer or other electronics. I've had a cell phone for about 10 years. I've changed phones at least 5 times. My kids all have phones. Over the years we would have spent more on insurance than the benefits we would have gotten from broken phones.
By John @ 08/02/10 02:50:35 PMreport abuse
Floods can happen to anyone?
If you live at the top of a 100 foot hill, and your property drains away from your home, you'd need a 100 feet of flood water before it got to your doorstep. If that happens, you don't need insurance, you need an ark!

Of course, this has been exaggerated for illustrative purposes. Flood plains are well known and easy to spot. Don't build in them, don't buy in them and don't worry about flood insurance as long as you've proper drainage.
By Gabe @ 08/02/10 02:49:01 PMreport abuse
Flood Insurance
I would definitely take a look at a map before I pay for flood insurance. It's subsidized by the gov't if you're in the flood zone, but I don't think it is if you're not. You have to take into account the size of the catchment your house is in along with your elevation relative to the stream. If you're in a catchment with a small, unnamed, ephemeral stream you have almost no worries. Those floods last year took place along larger perennial streams & creeks that were fed by the smaller systems.
By Felchy @ 08/02/10 02:15:38 PMreport abuse
Flood Insurance
I would recommend flood insurance. Our community is not in a flood zone but many, many homes just suffered tremendous damage. Treat floods like fires. They can happen to anyone.
By Kathy @ 08/02/10 01:20:01 PMreport abuse
annualcreditreport.com
Is not free, Quizzle.com is. That's the one Clark Howard turned me on to.
By Toni @ 08/02/10 01:00:49 PMreport abuse
flood insurance
What about flood insurance on your home when you are not in a flood zone and it is not required by your mortgage company?
By acparrks @ 08/02/10 12:29:11 PMreport abuse
Cell phone insurance
What's everyone's thoughts on insurance for your smartphone? If yes any alternate companies other than the cell phone provider you recommend? I want to say no to the insurance but I'd like to hear your thoughts and suggestions.I did pay with my credit card and they should double the manufacturers warranty.
By Kevin @ 08/02/10 12:20:18 PMreport abuse
Best Investment
We insure our homes and cars and we should insure our health. Even when you are young and "healthy" it is critical that you insure against the unforeseen. Accidents happen and many medical conditions lay in wait and unexpectedly present themselves when you least expect it.

The trick when you are young, healthy and relatively risk adverse is to chose a plan with a very high deductible. This way you pay for most routine care and medicine, but insure against a catastrostrohpic injury or disease.
By Fred @ 08/01/10 11:00:10 AMreport abuse
Thanks to All - and keep advice coming
I'd just like to thank everyone for their comments and suggestions. Keep on keepin' on!
By DannyD BBB @ 07/30/10 10:54:11 AMreport abuse
Danny
It won't be a waste of $400 montlhly if you get really sick or injured. Cancer is not unheard of in 30's and if that or some other expensive disease or injury hits you would be completely wiped out. Look for cheaper insurance with a higher deductable and put what you save on the premiums in an emergency fund to cover the deductable.
By Lori @ 07/30/10 06:06:29 AMreport abuse
Re: Kate
True but having a 10k deductible rules out anything but a catastrophy, as most broken bones, tests, injuries would be paid out of pocket and the savings in premiums is not that big to allow savinga a 10k fund for things...E.R. rooms can't turn you away for not having money or insurance, you might have to wait with a non-life threatening condition but you will get treated, or sent to a hospital that will treat you.
As far as costs go, a lot of times tests and treatments cost less if you have no insurance, doctors stick it to insurance companies...dont believe me look at a doctor or dentist's bill and see what they charged the insurance company, then call and explain that you have no insurance and would like to work something out....many times you will get a significant discount. There are also charity hospitals that will do surgeries for free if you can prove you are indigent or poor. Finally why do you think Arizona wants to get rid of the illegals there? It's not because they are taking jobs, but because they are overwhelming the healthcare and social services.
By Dave @ 07/29/10 08:14:09 PMreport abuse
Shop around
Danny, it sounds like you can do better than that policy. Try quotes from an independent broker. And maybe raise your deductible to something like $10,000. Then you're covered for catastrophic problems, but your monthly premium drops. That savings can then fund routine care.

But DON'T drop the insurance. You could end up tens of thousands of dollars in debt in literally one day, with one problem. Even worse, it means you may not be able to get care when you need it. Emergency rooms are only obligated to treat people in immediate danger of losing their lives - heart attacks, car accidents, etc. - and not for free. Regular doctors, specialists, etc. are under no obligation at all. If you find yourself with a condition that is far more than routine, but not immediately life threatening - think cancer, a bad back or knee problem, etc. - you will find it all but impossible to get a doctor to see you without insurance or upfront cash. That's an ugly situation when one MRI is $2,000 and a cancer drug can run $10,000 per dose.
By Kate @ 07/29/10 07:11:44 PMreport abuse
Keep the insurance
Melissa is so right - consider other plans but keep some sort of health insurance. Hospital and other meidcal costs can be huge, like the appendectomy example. Just make sure it is through a reputable company and that it's coverage is, as Clark says, catastrophic and comprehensive.
By mlj @ 07/29/10 02:05:21 PMreport abuse
Danny
Danny, you might be better off switching to a different plan with lower monthly premiums. I think it's still important to have some sort of health insurance b/c you never know, for example, if you are going to get something like appendicitis and then you have to go to the hospital for surgery. This happened to my boyfriend who is healthy and barely uses his insurance. He is so glad he kept his insurance b/c they paid about $20k for his emergency appendectomy surgery at the hospital. What would he have done without insurance? And his $5,000 deductible did not apply to the hospital bills b/c it was an emergency. You should do more research on what plan works best for your needs.
By Melissa @ 07/29/10 12:00:22 PMreport abuse
Health Insurance
I'd like some reader thoughts on this - I'm a single 32 year old self employed guy, and strongly considering canceling my health insurance. I currently pay almost $400 a month. I have a $50 co-pay, and my deductible is $3500... so basically, I have to pay a ton if I were to get sick or need a doctor. This $400 is money down the drain.... I think I'd be better off saving the money in an emergency fund. Thoughts???
By DannyD BBB @ 07/29/10 10:59:40 AMreport abuse

Cell phone insurance

I bought a new iPhone4 a couple weeks ago, thinking it would be covered under our existing AT&T phone insurance, which costs $4.99/mo. Received a letter saying it was no longer covered, but insurance was available from Asurion's MobileProtect plan for $11.99/mo. with a $199 deductible! Ridiculous! After checking around I found three companies that offer a better deal: SquareTrade, Worth Ave. Group and GoCare. I'm going with SquareTrade for $99 for two years' coverage against breakage and electronic failure. Deductible is only $50!

By NickB @ 08/06/10 10:19:50 AMreport abuse

Health Insurance

I am a life and health agent and believe that the high deductible plans are good to have. Some that I offer have a number of doctor visits for a small copay and then a high deductible which keeps your monthly premium affordable. Better to be safe than sorry!

By James Flournoy @ 08/04/10 09:39:58 PMreport abuse

Flood Insurance and Wind and Hail

I am located in a flood plain, however, the elevation on my property indicates my prop not subject since I am 20 ft above a tidewater tributary...I do presently have it for my son-in-law's comfort! Wind and hail insurance in the coastal area is exorbitant and being "older" and on fixed income will likely have to sell and move because of it.

By Pat Carterette-Hardee @ 08/03/10 11:44:46 AMreport abuse

Collision insurance

We have '95 and '99 Explorers with low mileage. Although the Blue Book is pathetic both are in excellent shape. We have both been hit by uninsured motorists and found collision insurance was a very cheep way to have them pursue the other drivers successfully.

By Rebecca @ 08/02/10 06:26:44 PMreport abuse

Insurance on retail items

In general I agree that it's not worth buying warranties on retail items but I've come out ahead twice with extended warranties on computers. I've had motherboard failures on 2 computers that were covered by 3- or 4-year contracts that I paid about $29-49 for. Both times I got new computers that were better and faster than the original ones when repairs would have cost almost as much as a new computer. So I wouldn't say NEVER buy one.

By Randy @ 08/02/10 06:12:07 PMreport abuse

flood insurance

If you do not live in a flood zone and the insurance is dirt cheap. I pay $356 a year for maximum coverage. I may never use it, but if a hurricane comes my way I sleep better knowing I have it. It's a no brainer and falls under the "2 C's"

By bryan @ 08/02/10 05:27:56 PMreport abuse

umbrella

Do you need to have collision if you have an umbrella plan?

By Mary @ 08/02/10 05:14:51 PMreport abuse

I'm also self employed, a similar age, and only pay $60 a month for truly catastrophic coverage with a $7,500 deductible. I figure a $7,500 bill is a lot better than bankruptcy if something terrible happens.

By Gabe @ 08/02/10 02:59:11 PMreport abuse

I absolutely agree with Clark on this - don't EVER buy it. It's nearly 100% of the time a losing gamble for the following reasons. First off, most items don't break in the first few years. Secondarily, if it does break, the repair is likely less than the warranty would have cost anyway. Finally, read the fine print on these warranties BEFORE you buy them. Two biggies to watch out for, obviously read the exclusions and look for ridiculous rules, like a camera warranty that won't cover a repair if they find a grain of sand in it. And then look for what they replace it with if they can't repair it, odds are that they'll give you a refurbished model as a replacement. Check online to find what your item goes for used, again, odds are that it's less than the warranty anyway so even if it "pays off" you still lost money.

By Gabe @ 08/02/10 02:55:36 PMreport abuse

Cell phone insurance is similar on a computer or other electronics. I've had a cell phone for about 10 years. I've changed phones at least 5 times. My kids all have phones. Over the years we would have spent more on insurance than the benefits we would have gotten from broken phones.

By John @ 08/02/10 02:50:35 PMreport abuse

Floods can happen to anyone?

If you live at the top of a 100 foot hill, and your property drains away from your home, you'd need a 100 feet of flood water before it got to your doorstep. If that happens, you don't need insurance, you need an ark!

Of course, this has been exaggerated for illustrative purposes. Flood plains are well known and easy to spot. Don't build in them, don't buy in them and don't worry about flood insurance as long as you've proper drainage.

By Gabe @ 08/02/10 02:49:01 PMreport abuse

Flood Insurance

I would definitely take a look at a map before I pay for flood insurance. It's subsidized by the gov't if you're in the flood zone, but I don't think it is if you're not. You have to take into account the size of the catchment your house is in along with your elevation relative to the stream. If you're in a catchment with a small, unnamed, ephemeral stream you have almost no worries. Those floods last year took place along larger perennial streams & creeks that were fed by the smaller systems.

By Felchy @ 08/02/10 02:15:38 PMreport abuse

I would recommend flood insurance. Our community is not in a flood zone but many, many homes just suffered tremendous damage. Treat floods like fires. They can happen to anyone.

By Kathy @ 08/02/10 01:20:01 PMreport abuse

annualcreditreport.com

Is not free, Quizzle.com is. That's the one Clark Howard turned me on to.

By Toni @ 08/02/10 01:00:49 PMreport abuse

What about flood insurance on your home when you are not in a flood zone and it is not required by your mortgage company?

By acparrks @ 08/02/10 12:29:11 PMreport abuse

What's everyone's thoughts on insurance for your smartphone? If yes any alternate companies other than the cell phone provider you recommend? I want to say no to the insurance but I'd like to hear your thoughts and suggestions.I did pay with my credit card and they should double the manufacturers warranty.

By Kevin @ 08/02/10 12:20:18 PMreport abuse

Best Investment

We insure our homes and cars and we should insure our health. Even when you are young and "healthy" it is critical that you insure against the unforeseen. Accidents happen and many medical conditions lay in wait and unexpectedly present themselves when you least expect it.

The trick when you are young, healthy and relatively risk adverse is to chose a plan with a very high deductible. This way you pay for most routine care and medicine, but insure against a catastrostrohpic injury or disease.

By Fred @ 08/01/10 11:00:10 AMreport abuse

Thanks to All - and keep advice coming

I'd just like to thank everyone for their comments and suggestions. Keep on keepin' on!

By DannyD BBB @ 07/30/10 10:54:11 AMreport abuse

Danny

It won't be a waste of $400 montlhly if you get really sick or injured. Cancer is not unheard of in 30's and if that or some other expensive disease or injury hits you would be completely wiped out. Look for cheaper insurance with a higher deductable and put what you save on the premiums in an emergency fund to cover the deductable.

By Lori @ 07/30/10 06:06:29 AMreport abuse

Re: Kate

True but having a 10k deductible rules out anything but a catastrophy, as most broken bones, tests, injuries would be paid out of pocket and the savings in premiums is not that big to allow savinga a 10k fund for things...E.R. rooms can't turn you away for not having money or insurance, you might have to wait with a non-life threatening condition but you will get treated, or sent to a hospital that will treat you.
As far as costs go, a lot of times tests and treatments cost less if you have no insurance, doctors stick it to insurance companies...dont believe me look at a doctor or dentist's bill and see what they charged the insurance company, then call and explain that you have no insurance and would like to work something out....many times you will get a significant discount. There are also charity hospitals that will do surgeries for free if you can prove you are indigent or poor. Finally why do you think Arizona wants to get rid of the illegals there? It's not because they are taking jobs, but because they are overwhelming the healthcare and social services.

By Dave @ 07/29/10 08:14:09 PMreport abuse

Shop around

Danny, it sounds like you can do better than that policy. Try quotes from an independent broker. And maybe raise your deductible to something like $10,000. Then you're covered for catastrophic problems, but your monthly premium drops. That savings can then fund routine care.

But DON'T drop the insurance. You could end up tens of thousands of dollars in debt in literally one day, with one problem. Even worse, it means you may not be able to get care when you need it. Emergency rooms are only obligated to treat people in immediate danger of losing their lives - heart attacks, car accidents, etc. - and not for free. Regular doctors, specialists, etc. are under no obligation at all. If you find yourself with a condition that is far more than routine, but not immediately life threatening - think cancer, a bad back or knee problem, etc. - you will find it all but impossible to get a doctor to see you without insurance or upfront cash. That's an ugly situation when one MRI is $2,000 and a cancer drug can run $10,000 per dose.

By Kate @ 07/29/10 07:11:44 PMreport abuse

Keep the insurance

Melissa is so right - consider other plans but keep some sort of health insurance. Hospital and other meidcal costs can be huge, like the appendectomy example. Just make sure it is through a reputable company and that it's coverage is, as Clark says, catastrophic and comprehensive.

By mlj @ 07/29/10 02:05:21 PMreport abuse

Danny, you might be better off switching to a different plan with lower monthly premiums. I think it's still important to have some sort of health insurance b/c you never know, for example, if you are going to get something like appendicitis and then you have to go to the hospital for surgery. This happened to my boyfriend who is healthy and barely uses his insurance. He is so glad he kept his insurance b/c they paid about $20k for his emergency appendectomy surgery at the hospital. What would he have done without insurance? And his $5,000 deductible did not apply to the hospital bills b/c it was an emergency. You should do more research on what plan works best for your needs.

By Melissa @ 07/29/10 12:00:22 PMreport abuse

I'd like some reader thoughts on this - I'm a single 32 year old self employed guy, and strongly considering canceling my health insurance. I currently pay almost $400 a month. I have a $50 co-pay, and my deductible is $3500... so basically, I have to pay a ton if I were to get sick or need a doctor. This $400 is money down the drain.... I think I'd be better off saving the money in an emergency fund. Thoughts???

By DannyD BBB @ 07/29/10 10:59:40 AMreport abuse

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Jul 28, 2010 -- Catastrophic and comprehensive are the two C's of insurance

What others are saying