Top 10 Common Insurance Mistakes to Avoid

When it comes to insuring your health, house, car, and assets, a mistake can affect you financially. It might even be TOO LATE by the time you need your insurance coverage.

And because it’s necessary to protect your assets and finances, make sure you have the right type and amount of policy and understand the following Common Insurance Mistakes to Avoid.

10 Most Common Moves to Avoid When Buying Insurance

1. Not Knowing Your Policy

Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University says that one of the biggest mistakes is not knowing what’s in the fine print of your policy.

Clients may not even know what their deductibles are and don’t realize what’s not covered until disaster strikes. Baranoff says they need to talk to their agents to find out what’s not covered and do an evaluation each year.

2. Choosing Not to Have Basic Insurance

This one is a no-brainer. Being stingy by not having basic insurance can be a costly mistake as the years go by. For instance, you should have…

• Car insurance that covers accidents and thefts
• Renter’s or homeowner’s insurance to cover thefts and fire
• Basic health insurance to cover medical bills as these can add up quickly
• Disability insurance to protect you if you become seriously injured or ill

Many people struggle to afford health care even with health insurance, and going without may financially cripple you if some unfortunate event happens. If you cannot afford a comprehensive health insurance policy, you should at least get a high deductible or catastrophic health insurance plan.

3. Only Comparing Insurance Company Rates

It’s important to compare insurance companies and select one with competitive prices. However, be sure the insurer you choose is financially sound and provides good service.

Check out the financial health of a company with how they rank with independent or third-party insurance rating agencies such as A.M. Best, Moody’s, Fitch Ratings, and Standard & Poor’s.

Ask friends and family members about their experiences with insurance company and choose one that will respond to your needs and handle claims fairly and efficiently.

4. Under/Over Insuring Yourself

The insurance you get could either be too much or not enough. It can be difficult to determine how much basic insurance you really need. When you are younger, you will not need as much insurance, since you do not have as many assets.

On the other hand, when you are stable and established, you should consider the maximum amount your insurance will cover needed expenses. You should talk to an insurance agent about your assets and how best to protect them.

Independent or company agents rely on the help of insurance virtual agents to handle activities that are too time-consuming so they are free of distractions when communicating with their clients.

5. Buying the Wrong/Unnecessary Insurance Policies

In connection with #4, avoid buying too many policies or the wrong types of insurances. Make sure you understand the insurance company policies that you are getting. You will not be surprised when it comes time to file a claim if you understood exactly what you signed up for.

For example:

• Getting unnecessary life insurance – Most people don’t need life insurance on their kids. While the death of a child is tragic, financially it’s not as detrimental as a breadwinner passing away.
• Getting specialized insurance – Be wary of buying too-specific variants of broader types of insurance. You may need life insurance, but you shouldn’t buy it at the car dealership.

6. Not Shopping Around for a New Policy

Every two or few years, shop around for a basic insurance policy. This can help you to keep your rate low and save you some money by switching to a new policy.

J. Robert Hunter of Consumer Federation of America says that these two actions can make a huge difference in the price you pay for your policy:

• Read the insurance buyers guides offered by state insurance departments
• Call all around to a few different companies

7. Failing to Ask for Discounts

Let your insurer know that you qualify so you can get credit for some discounts. You should look at policies that offer discounts for where you work or where you went to college.

The list varies from company to company but often includes installing a home alarm system, adding storm-proof shutters, taking a job with a shorter commute / not commuting anymore, carpooling and even working at certain occupations.

8. Relying on Life Insurance Rules of Thumb

The general advice is to buy enough life insurance to equal 8-12x your annual income. But two people who earn the same income may need very different amounts of coverage.

If one is the sole earner in a family with several young kids and the other has a working spouse and children in college—you need to consider what your family’s income and expenses will be after you die.

9. Ignoring a Bad Complaint Record

Avoid companies with a higher-than-average complaint ratio. Look up the insurer’s customer-service rating through the National Association of Insurance Commissioners’ Consumer Information Source, and.

10. Giving in to Inertia

The insurer that offered you the lowest rate a few years ago may no longer have the best deal. Get price quotes from several insurers whenever you experience a major change like the following:

• You get married
• Move to a new state
• Buy a new car
• Or your teenager starts driving

Also go shopping if you’re hit with a rate hike. Get quotes at www.carinsurance.com, www.insweb.com or in-surers’ sites (such as www.allstate.com, www.statefarm.com and www.progressive.com). You can find an independent insurance agent at www.iiaba.org.

Whether first-time buyer or have had insurance coverage for years, you can keep insurance costs under control by avoiding these ten common mistakes.

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We would love to hear if these tips worked for you! If you have questions or any Real Estate related success stories, please leave a comment below.