Our thanks to FiLife.com and M.P. McQueen:

Are You Overinsured?

It used to be that one of the biggest mistakes people made was not having enough insurance.

Now, it’s likely that the opposite is true, as insurers flog all sorts of new products and features — from a free tow when your car breaks down, to special help paying off debts if you get sick. Some consumers also are paying too much for extra and perhaps unnecessary coverage.

The changes take many forms. In the past few years, Acura, BMW, Mercedes-Benz and other auto makers have added emergency roadside assistance in their car warranties. Playing identity-theft fears, coverage also is cropping up that promises to repair damage if you become a victim. Such insurance can cost anywhere from $25 to $200 a year — even though it’s already part of some homeowners’ policies and credit-monitoring services.

Complicating matters: As competition among life and auto insurers heats up, those prices are tumbling. It’s partly because of longer life expectancies and safer cars, but also increased competition from Geico, a division of Berkshire Hathaway Inc., and Progressive Corp., two insurers that sell directly to consumers and are shaking up the traditional insurance-agency business. Anyone who bought as recently as a few years ago, then stuffed the policy into a bottom drawer, should re-evaluate.

TERM LIFE INSURANCE: There are a number of ways to trim insurance fat. Perhaps the biggest is in term life insurance, where premiums have dropped about 50% in the past 10 years. The reason for the drop is improved life expectancy — we’re living longer. While that’s good news in itself, it also means a healthy 40-year-old man today can buy a $1 million policy in some cases for less than half what the same person would have paid 10 years ago, at age 30.

Sharon Emek, 61 years old, a New York-based insurance broker, says she recently replaced her old $500,000, 20-year term life-insurance policy with a new one and saved 20%, even though she was five years older than when she bought the previous one.

Get price quotes on a replacement term-life policies.

The catch? Insurers now use a plethora of health classifications, as opposed to just “smoker” and “nonsmoker” of years gone by, and few people qualify for the best rates.

If you no longer need a big death benefit because your children have left home, your spouse has died or the mortgage is paid, consider dropping a term policy or replacing it with a smaller one. Recalculate using the life-insurance tool at smartmoney.com.

Other ways to save: Pay premiums annually instead of quarterly or monthly. Insurers often charge a 10% to 50% surcharge for installment financing without disclosing the fact, says Glenn Daily, a fee-only insurance planner based in New York.

Warning: Never cancel a policy before getting a new one. Medical tests required by new insurers before issuing a new policy could reveal a problem, such as high blood pressure, that could send the premium soaring. And never surrender a cash-value policy before talking to a tax adviser, because you could get socked with a big tax bill.

CRITICAL-ILLNESS POLICIES: Two types of products that are being heavily flogged right now are cancer and critical-illness policies. Essentially, insurers are hoping to capitalize on people’s fears of dread diseases amid rising health-insurance and health-care costs. They’re popping up as a worker-paid benefit offered by employers.

However, policies like these don’t pay a benefit unless you get the specific conditions and treatments spelled out in the policy. There are numerous policy exclusions and exceptions. Instead, get comprehensive health and disability insurance.

ACCIDENTAL DEATH: Accidental death and dismemberment policies — sometimes offered as an add-on to a life policy — are similarly not usually worth the money. Basic life and disability insurance covers a person no matter how they die or become disabled. (One big exception can be suicide.) In any case, only one in 3,000 deaths is accidental, according to the Society of Actuaries.

Another avoidable purchase is separate life insurance for children. For one thing, children can often be included in the parent’s policies at lower cost.

Coverage that promises to pay your bills if you’re incapacitated or die is particularly tricky. Called credit-life, mortgage-life and credit and mortgage-disability insurance, these products are expensive, and you don’t need them if you have life insurance and disability insurance.

Be particularly watchful that this kind of coverage doesn’t get wrapped into the mortgage or car loan, where it can be especially pricey.

HEALTH PLAN, HOME POLICY: If you and a spouse or partner are each insured by a different employer’s health plan, consolidate under one plan. Most health-insurance plans are designed to prevent redundant coverage, so it is seldom worth the extra premium to have a secondary insurer.

The insured value of your home should reflect the cost of rebuilding the home, not its market value, which includes the land. If you have an inflation-adjustment feature or rider in your home insurance policy, you may not need additional insurance to keep pace with rising rebuilding costs, providing you haven’t remodeled or added on since buying the policy.

But if you do remodel, make sure to update the policy. This is one of the biggest ways people end up underinsured.

If someone in your home has retired or is always at home, your insurer may offer a discount because your home is less likely to be broken into or suffer damage from a big leak. Allstate Corp., for instance, gives homeowners who are “55 and Retired” a 10% discount and renters get 25% off their annual premium. Improvements in security, plumbing, roofing and electrical systems also often qualify for discounts.

If you have at least 20% equity in your home, cancel your private mortgage insurance, or PMI, policy. Since 1999, lenders have been required to automatically notify you when you’re eligible to drop it. But you may qualify earlier if the property value has increased significantly.

AUTO INSURANCE: An easy way to save on auto insurance: If an older car’s replacement value becomes less than the cost of the annual premiums, you can drop collision and comprehensive coverage (assuming that the car isn’t leased or financed). But don’t skimp on liability coverage, which protects you from lawsuits. Rule of thumb: Buy enough to cover the value of your assets.

It’s getting tough to not have coverage for emergency roadside assistance. Auto makers are increasingly including it in a car’s warranty, and some credot cards  also include it as a benefit.

Have a kid heading to college who’s on your auto policy? Most insurers will give a discount for a child attending college 100 miles away or more. Ditto for retired drivers.

And of course, car-rental coverage is almost never needed if you already pay for collision and comprehensive insurance on your own car. Warning: Some policies have exceptions for SUVs and luxury cars, and for coverage abroad, so read the policy carefully.

Corrections & Amplifications:

One in 22 deaths annually in the U.S. is the result of an accident. Because of incorrect information supplied by a spokesman for the Society of Actuaries, this article incorrectly gives the figure as one in 3,000 deaths.