Insurance is a crucial part of your financial plan. You need to protect your family and your valuable assets from problems that can come up every day. Unfortunately, some insurance companies take advantage of our desire to stay safe and have come up with some products that pretty much just waste your money.

Here are 5 of the worst insurance policies you can buy.

  1. Mortgage And Car Loan Life Insurance

    When you take out a mortgage or car loan, the lender might ask if you'd like life insurance to back up the loan. The idea is that if you died before paying off your loan, the insurance would pay the money back so your heirs would be debt-free.

    These policies are a waste because they cost about the same as regular life insurance but they don't give your heirs any flexibility. Regular term life or whole life insurance makes a lot more sense here. If you pass away, your heirs would receive a lump sum of money and they can decide what they need most, including paying off your debt. Depending on how much you still owe for your mortgage or car when you die, the benefit you get from a regular life insurance policy might well repay what's left with money to spare for your family or other beneficiaries.

    If you have mortgage or car loan life insurance, that money would go to the lender instead. If you only have $20,000 left on your mortgage at the time of your passing, that's what will be paid out to cover the loan. So although that one debt will be covered, your heirs could miss out on a lot of money.

  2. Critical Illness Insurance

    Critical illness insurance pays for your treatment or gives you a lump-sum payment when you are diagnosed with a specific illness. These policies have a list of illnesses they will cover like heart attacks, cancer, strokes, etc.

    The problem with critical illness insurance is that if you don't come down with any of the covered illnesses, you won't receive anything. Insurers usually have set conditions for what counts, so even if you have a critical illness that you think applies, you still might not receive anything.

    You're better off buying regular health insurance or disability coverage that would cover all illnesses.

  3. Accidental Death And Dismemberment

    Accidental death and dismemberment insurance pays out if you are killed or disabled in some type of accident. Once again the problem with this coverage is that you're gambling on an outcome. If you're killed or disabled from something other than an accident, these policies don't pay anything.

    Regular life insurance and disability insurance policies make more sense.

  4. Dental Insurance Outside Of Work

    If you don't have dental insurance through your job, you shouldn't look to buy dental insurance outside of work. The market for individual dental insurance plans isn't very good.

    These policies charge a relatively expensive premium, have low limits on the amount they pay out each year, and often exclude important procedures like cosmetic care. As a result, you'd still be paying a large amount out-of-pocket for dental work even after you've spent money on dental insurance.

    You're better off saving the premiums and using that money to pay for dental care yourself.

  5. Rental Car Insurance

    When you go to rent a car, the rental agency will ask if you'd like to add rental car insurance for damages. Chances are, you already have this coverage. If you already have auto insurance for your car, this coverage should extend to your rental car.

    Your credit card may also cover damages if you pay for the reservation using the credit card. Before renting, you should double check with your insurance and/or credit card companies to make sure you're covered, but chances are, you don't need to pay for this extra insurance with the rental company.

    Don't spend your money on these unnecessary products. By avoiding insurance policies that waste your money, you can put the savings towards the insurance you actually need.