I'm looking at Honda Fits and the dealer has tacked on two "add-ons" to the window sticker. One is a brake light (Brakely?) upgrade that flashes and is ridiculously overpriced. The other is "AllState Insurance" which adds another $100 or $200 dollars if I recall correctly.

My question is this. What's the point of "add-on" insurance? I've already got a good insurance company and would just add this to my policy. What am I missing or misunderstanding? Is this something I can just refuse?

 

Typically (all) add-ons are just profit-makers for the dealer. Decline them.

 

The insurance may be "gap insurance", which covers any difference between the value of the car (which is what insurance would pay in an accident where the car is totaled) and the amount owed on the car. If you have a loan, particularly a longer term loan with a small down payment, it might be a good idea to have gap insurance...but if you are making a decent sized down payment and have a shorter term loan, it's probably unnecessary. If you're paying with cash, it doesn't make any sense to even offer it.

As a general rule of thumb, if the dealer is pushing an add-on strongly, they usually aren't doing so because it loses money or breaks even for them on average.