The biggest insurance mistakes may not show up right away or even at all, but the consequences if they materialize can be very difficult to navigate. Choosing an insurance plan can be complicated, so when doing so, try to avoid these mistakes:
1. Not Having Insurance
Whether you’re trying to save money or think you’re young enough to get by without it, foregoing basic insurance coverage can be an incredibly costly mistake.
As life is full of uncertain events which do not choose between young and old, it is prudent to buy health insurance for example.
Notably, health Insurance covers are cheaper for younger age groups and therefore it is advisable that they take advantage of this.
2. Under Insuring
Less comprehensive coverage or basic insurance plans can equate to lower premiums every month. The problem is you’re likely to make up the difference anyway when it comes to your deductibles and out-of-pocket expenses. By not giving yourself enough insurance coverage upfront, you’re taking a gamble of whether or not you’ll actually need to use it. One broken bone could quickly cost you more than if you had paid the higher premiums upfront.
3. Over Insuring
Talk to an insurance agent to figure out the right amount of insurance for your specific circumstances. Just as you don’t want to under-insure yourself and your possessions, over-insuring could be equally as costly. One instance where this can happen is with auto insurance. If you have an older car, you may have more collision coverage for collision and comprehensive than you need. Check the amount periodically to make sure you’re not paying for unnecessary coverage.
4. Not Asking for Discounts
If you don’t ask for a discount, then you may never know if you would have gotten one or not. There are possible discounts you can qualify for, but if you don’t tell your agent and ask what you can get, they will never know that they need to apply them to your account.
5. Not Looking Around for New Policies
You should be shopping around for a new basic insurance policy every few years. In some instances – especially if certain circumstances have changed. You can save money by updating your policy or switching providers. Some insurance companies may even offer discounts for various reasons, so the best is to get quotes from several insurers so as to get the best deals. It’s also good to rate shops whenever you are hit with a rate hike.
6. Misunderstanding Your Policy
Make sure that you understand what your policy covers, under what circumstances it can be used and what you can still expect to pay out-of-pocket. Having a thorough understanding of your policy now means avoiding unwelcome surprises when it’s time to file a claim.
7. Not Updating Coverage for Life Events
Life for your family changes over time. Insurance coverage should evolve over time as well. If you welcome a new child, this is a change that requires some insurance updates. If the value of your home changes, then your homeowners Insurance may need to change as well to reflect the change.
8. Picking a Health Policy on Premium Alone
You may think that you are saving money because the premium is low on your insurance. Insurance companies, however, can sometimes find less obvious ways to make their money back.
Some examples include:
- Higher co-pays during doctor visits
- If a doctor’s visit is out of your network, out-of-pocket costs may be higher
- Prescription drugs may be more expensive
Consider how often you visit the doctor’s office annually, ongoing conditions, and any prescriptions you’re currently on. This can help you find an insurance policy that covers what you need without breaking the bank.
9. Hiding Medical History
Insurers rely on the information provided by the insured at the time of policy purchase. The terms and conditions of the policy are based on this element of trust. To ensure that the policy is approved, or even for lower premiums, some people hide their medical conditions and lifestyle habits from the insurer. At the time of claim, insurers conduct an exhaustive check and this is when the truth will eventually come out. Needless to say, this leads to rejection of the claim and may even qualify you as a fraud.
10. Looking Only at Cost When Selecting Insurance
Price should not be the only factor when looking for a good deal. While it’s a good idea to shop around every few years, switching insurers just to save a few dollars can backfire. Look up reviews on the insurers, how easy they are to deal with when filing a claim, and their customer insurance ratings. Saving money does you no good if your new insurer will fight you on every claim.
11. Sticking to Life Insurance Rules of Thumb
The standard advice for life insurance coverage is eight to twelve times your annual salary. But you need to really look at the needs of each individual. Two people who earn the same income may need very different amounts of coverage. Things to consider include whether you are the sole earner, and the needs of your dependents (like childcare or college).
12. Insuring Your Home for Its Market Value
The market value and the insurance value are not the same. You need enough insurance to pay to rebuild your home and replace your possessions if it is destroyed, which can often be higher than the market value.
13. Buying Only the Minimum Insurance Required
Buying only the minimum insurance cover required by law, such as Third Party Insurance for motor vehicles, can cost you more if you are in an accident. Chances are drivers will need more liability coverage than what the state requires, and any difference will have to come out of your pocket.
14. Skipping Domestic Package Insurance
When you rent a premise, your landlord’s insurance will protect their property, but that protection does not extend to your personal possessions. Domestic Package Insurance can protect you in case of fire, theft, flooding, or other natural disasters. Many people skip Domestic Package Insurance because they underestimate the true cost of replacing all their possessions. Fortunately, this cover is relatively cheap, and most households can afford to purchase it.