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Letter to the editor

Say no, thanks, to utility line insurance

Utility and phone line insurance may sound appealing, but it's unnecessary.

By HELEN HUNTLEY, Personal Finance Editor
Published December 2, 2007

The letter in my mailbox last month from TECO Peoples Gas took me by surprise. The company wanted me to insure my gas pipes for $5.99 a month.

Up until that moment the gas pipes in our house functioned quietly in the background without ever requiring any thought on my part. TECO offered something new for me to worry about while simultaneously promising to come to my rescue with "Inside Gas LineProtect," described as "very important coverage to have."

I passed.

While I don't fault TECO for offering it, LineProtect is another example of insurance products consumers don't need. We also don't need to insure our phone wires ($4.99 a month to Verizon) or electrical wires ($3.95 a month to Progress Energy). The offerings are utilities' version of the extended warranties that retailers promote - and we don't need.

TECO says it's offering the product (provided by a third party) mainly to protect its customer base. If a gas line repair is too expensive, customers might just give up their gas appliances and switch to electricity. But the customers benefit too, spokesman Lance Horton said.

"For not much money, it's a valuable tool and peace of mind," he said. "In the unlikely event you have a problem, it's taken care of. One service call is more than the annual premium."

I'll readily admit that if I had a problem soon after signing up, I'd be glad to have my conduits covered. But those three coverages together add up to $179.16 a year, which is a lot considering that I have not spent a dime on electrical, phone and gas line repairs in the six years I have lived in my house.

The whole point of insurance is to have help for expenses that could create financial devastation. If you cover the first dollar of your costs with little or no deductible, you inevitably pay more for insurance than it's actually worth.

And in this case, you aren't getting coverage for catastrophes. You'll have to rely on your homeowners insurance or flood insurance policy if lightning wipes out your home's electrical system or a flood destroys your telephone wiring.

Verizon's inside wire maintenance coverage doesn't include flood damage. Progress Energy's $3.95 Home Wire Service has a $500 cap and doesn't cover lightning. TECO People's Gas puts a $1,000 limit on what it will pay for gas line repairs.

Now I know somebody out there is saying, "I can't afford a $500 repair." You can, though, if you self-insure. If you're worried about your gas, phone and electrical lines, you can set $14.93 aside every month instead of sending it in with your utility bills to buy insurance. Over six years you'll save $1,075 even without interest.

Setting money aside is an old-fashioned concept; it's what people used to do before we all had credit cards. And it's still worth doing if money is tight. You can set money aside for any future expense that's too large to be handled out of normal cash flow. That might include repairs or replacement for vehicles and major appliances. It might include your next vacation or holiday gifts for next year.

Some people set money aside with an old-fashioned system of envelopes. Others do it with separate accounts, and still others do it by bookkeeping systems.

You can have all your money in one account and keep records designating it for one purpose or another. Some people buy special budgeting software such as Mvelopes, some use personal finance software such as Quicken, some a traditional spreadsheet such as Excel, and some just use hand-written ledgers. What's important is that you find a system that works for you.

[Last modified November 30, 2007, 21:58:34]