Andrew Tobias has been writing about personal finance for decades. In the 2005 edition of his classic, 30-year-old book, The Only Investment Guide You’ll Ever Need, he offers the following advice about insurance:
“Skip insurance you don’t need, including life insurance for children (a good buy only if your child is a movie star and you depend on his or her earning power); credit life insurance, offered as an option when you take out a loan (a good buy only for the elderly or terminally ill); flight insurance (a good buy never—only about a nickel of each dollar it costs goes to pay claims, the rest is marketing expense and profit); cancer insurance (it makes no sense to buy health insurance one disease at a time); car rental insurance (if your credit card or your own auto insurance policy covers you, as many do).
He’s not keen on appliance insurance, either—extended warranties on refrigerators, VCRs, TVs, washers, dryers, etc. “Even if you remember you have this insurance years from now,” he says, “when the appliance breaks, and even if the time you have to spend collecting on it is minimal—two big ifs—why pay someone to insure a risk you can afford yourself? Resist the salesman’s attempts to sign you up.”
Also keep in mind (though he doesn’t mention it) that an extended warranty usually duplicates the manufacturer’s warranty for the first six or 12 months. So if the TV maker gives you a one-year warranty, parts and labor, and you buy a three-year extended warranty, you’re really getting only a two-year extended warranty.
