Worst 9 Mistakes for Insurance Buyers
Have you made any of these mistakes?
An insurance policy is not exciting. There are hundreds of other more fun ways you could spend your money. But, insurance is an important part of your financial plan. It’s just way too risky to Not carry insurance.
When buying insurance coverage, it’s easy to make a mistake. Mistakes could cause the loss of your assets. And, those losses could create an unnecessary burden on your family’s monthly expenses.
When you shop for insurance, avoid these common mistakes:
1. Failing to shop various companies: (Pro Tip: your local independent insurance agent is your best bet. The agency can shop multiple companies for you. They do the shopping, so you don’t have to.)
Each insurance carrier determines their premiums using their own unique equations. Your unique demographic and risk profile may not be well-suited to all companies. This is why it’s best to let an independent insurance agent do the shopping for you. The agency has specialized knowledge and years of experience. Take advantage of their expertise, and save yourself hours of mind-numbing searching.
2. Are you ignoring the importance of long-term care insurance?
This kind of insurance can be pricey, but it is a policy that most people eventually need. The average claim cycle is three years. So, it could be possible to get the policy to a three-year period so the premium could be more manageable.
3. Buying too little insurance – or too much.
Due to their experience, insurance agents may suggest that you buy more than you think you should. And, usually, they’re right. Having too little coverage is a worse mistake than buying too much. On the other hand, purchasing too much insurance can result in more expense than truly necessary. It’s best to find that happy medium.
4. Assuming that just any policy will cover all your valuable property.
Many times, a general homeowners’ policy may not cover some items like jewelry, antiques, record collection, your firearms. Be sure to check that all the property that you might need to replace is covered.
5. Assuming purchase cost, or market price, is the same as replacement cost.
The purchase price of your home is not what it may cost to rebuild it. Lots of older homes cost less than half the price of rebuilding or replacement. – Keep in mind that the land your house sits on is also part of the market value. The insurance adjuster won’t pay you for the land portion of your property value after a flood or fire. Always keep in mind, you may need to rebuild your home after a major loss.
6. Forgetting to update your coverage.
Your needs will change over time. So, also, your insurance coverage will need to change from time to time. The insurance companies tend to change their pricing structure over time. So, that great deal you got this year might not look the best next year. Annually, revaluate your needs and have your local independent insurance agent “re-shop” your policies. Also, you may need to do a re-shop after a major life event. Keep your list of beneficiaries up to date.
7. Did you choose your deductible too low?
Low deductibles may seem like a great deal at first, but it’s rarely the best option. When you choose a low deductible, you will end up paying a larger premium. You may be able to lower your premiums by at least 25 percent by raising your deductible to the next level. Put that money you saved into your emergency fund and you’ll be prepared should you have to file a claim.
8. Buying coverage without checking out the company. (This is when it’s a great idea to work with an independent insurance agent. Take advantage of their knowledge and experience.)
The lowest price isn’t always the best option. Do your homework. Are there lots of complaints regarding claims refusals or slow response, then look elsewhere.
9. Did you trust the agent without checking them out first?
While most agents are highly ethical and would never sell an unnecessary policy, some insurance agents may be focused more on their own bottom line than yours. Double-check the information and advice that your agent provides.
Yes, insurance can be confusing, but it provides you with security and peace of mind. Do you have enough money in the bank to replace your home, car, or pay large medical bills when disaster strikes? Insurance can protect your assets and your future. Buying insurance coverage may be a monthly expense we don’t like, but it’s money well spent because you never know when disaster may strike.