Don't automatically buy extended warranties

You have to ask yourself: why is the merchant so eager to sell me an extended warranty or insurance? Because they will lose money on it?

The Consumer Federation of America has issued a new warning about these thiings:

According to J. Robert Hunter, the federation’s director of insurance, such add-on policies bought directly from the seller are often more expensive than if they were bought independently because the product sellers are generally offering insurance from insurers who would give them the highest commissions, driving up prices. In some cases, such “reverse competition can more than double the price of the insurance,” Mr. Hunter said in a statement.

The federation offers three steps for making the decision.

• First, consider if you really need the insurance. 
• Second, find out if you already have the coverage in your existing policies like your home or health insurance. 
• And finally, if the answer to the previous question is “no,” figure out if there are less expensive options out there.

Certain types of insurance generally aren’t necessary or are more expensive when bought as add-ons. 

These include credit insurance or debt cancellation insurance bought with the purchase of a car, home or furniture; title insurance sold at the closing of a home; travel insurance sold to you when you’re making travel plans; and collision insurance from car rental companies (your normal auto insurance or credit card policy probably already covers you). See the federation’s warning for more details about these policies.