Financial products that are a waste of money

There are many things that people buy, sometimes repeatedly, that are a waste of money or just a bad value. Often, you don't need them at all or you can opt for less-costly or free alternatives. Take a pass on these financial products and save hundreds or even thousands of dollars.

Skip it: Collision on older vehicles
Save: $300 a year, based on national averages in 2007

If you have an accident, collision coverage reimburses you only up to the value of your car, no matter how severe the damage. So at some point, the cost of the coverage might approach or exceed the maximum the policy would pay on a claim. You might consider dropping collision once its cost equals 10 percent of the car's book value.

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Self-insure by putting away a fixed amount each month to cover unexpected losses. Decide whether you should keep comprehensive coverage. Typically less costly than collision, it reimburses you for theft and nonaccident damage, for example, if a rock cracks your windshield or a falling tree limb dents your hood. But like collision, it won't pay more than the vehicle's worth, so weigh the cost.

Skip it: Load mutual funds
Save: About $200 to $300 on an initial investment of $5,000

Load funds siphon off 4 to 6 percent of your investment for sales commissions. No-load funds generally perform as well or even better.

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Skip the load and put your entire investment to work for you. Compare funds by type and rating at www.morningstar.com.

Skip it: Extended warranties
Save: $30 to a few thousand dollars

Some products, such as cars, have become more reliable, and others, including electronics, aren't likely to break down during the extended service contract period. Service plans often cost more than you'll recover, and many have fine-print terms that can limit or disqualify your claim.

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Buy reliable brands and models, and follow the manufacturer's usage and maintenance recommendations. If possible, make purchases with a credit card that extends the warranty. And if a product fails after the warranty has expired, try negotiating with the retailer and manufacturer for compensation.

Skip it: Fee-based checking
Save: $36 to $600, plus any per-check fees each month

There are many no-fee checking accounts that don't require you to maintain a minimum monthly balance. Some even pay interest, such as FNBO Direct (www.fnbodirect.com), which pays 1.25 percent.

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Check local and national banks and credit unions for the best deals. If you regularly use your debit card for purchases and can set up direct deposit or automatic billing, consider a high-yield checking account. To find one, go to www.checkingfinder.com or www.kasasa.com.

Skip it: Credit-card insurance
Save: 18 cents to $1.35 for every $100 of your balance each month

Also known as payment protection and credit safeguard, this coverage promises to make your minimum payments for a certain period or erase your entire credit-card debt in case of unemployment, injury, disability, or death.

Do this instead

Check for coverage you already have in other policies, such as life and disability. Or set up a fund to cover your bills if you lose your income.

Skip it: Cancer insurance
Save: $200 to $3,000

Like any disease-specific coverage (including those for strokes or heart attacks), cancer insurance might duplicate or even negate coverage you already have under your basic health insurance. Some cancer policies exclude certain types of cancer, or they might not pay at all unless you're hospitalized. And they're certainly no substitute for comprehensive medical coverage.

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Check to see what your health policy covers. If you're on Medicare and want more coverage, consider buying a Medicare supplemental policy. Medicaid recipients don't need additional coverage.

Skip it: Identity-theft protection
Save: $120 to $240 a year

These services might do less than they claim. In May, Lifelock, a leading vendor, agreed to pay $12 million to settle charges by the Federal Trade Commission and 35 state attorneys general that "the protection it actually provided left enough holes that you could drive a truck through it," said Jon Leibowitz, the FTC's chairman.

Do this instead

Take steps to protect your identity. For example, you can place a security freeze on your credit reports at all three major credit-reporting bureaus (Experian, Equifax, and TransUnion). That will deny access to your credit report to prospective creditors and prevent a scammer from setting up an account in your name. For more tips, see Protect Your Identity.

Skip it: Cell-phone insurance
Save: $48 to $96 a year

Between the cost of the coverage and the deductible, typically $25 to $100 or more, this insurance might not save you anything if you need to replace your phone because there might be fine-print exemptions. And if the policy does replace your phone, you might get a different or refurbished model.

Do this instead

Check your home and auto insurance policies to determine if your phone is (or can be) covered. When you get a new phone, don't chuck your old one if it still works. If the new one is lost, stolen, or breaks down, you might be able to use the old one for the duration of your contract. Another option is to buy a less-costly "unlocked" replacement.

This article appeared in Consumer Reports Money Adviser.