We get it, buying insurance can sound complicated and confusing, but it’s always better to be safe than sorry in the case of the unexpected, whether it’s a fire or a car accident. In the last few weeks, we’ve talked about a few different types of insurance, but before you run out and start shopping insurance, we wanted to talk about some common mistakes that people make when purchasing insurance and how you can avoid them.
Don’t assume that you can’t afford insurance. Most people assume that insurance is more expensive than it really is. When you’re looking into buying health or property and casualty insurance, always be sure to ask about potential discounts. Even though health insurance discounts can often be income-based, homeowners and auto insurers offer discounts for anything from being a member of AARP, to being a good student, or having a home security system. You never know if you don’t ask.
With that being said, don’t shop insurance policies based completely on price. Make sure that you’re getting the best bang for your buck. Are you buying from a reputable company? Is the coverage they’re offering the best fit for your specific needs? Saving a few bucks may sound good, but you don’t want to total your car and find out that you didn’t have the coverage you need to get it replaced. Whether it’s your home, your car or your health, you want to know that your insurance will cover you when you need it.
Avoid purchasing just the minimum amount of liability for your car. While that may be the only thing required to get you out on the road, covering yourself with the bare minimum means that you could be stuck paying more out of pocket in the case of an accident. In fact you could have your wages garnished or be forced to sell your assets if you don’t have enough insurance to cover your liability. Skip that and make sure that you’re covered if and when you need it.
Don’t assume that the coverage you had in the past still fits your needs. Life is full of changes and those changes can affect your insurance coverage. For example, if you’ve done some home improvements recently, you could be underinsured if the cost to rebuild your home has gone due to higher labor or material costs. That’s why it’s always good to go over your insurance once a year or so to ensure it still fits your needs.
Avoid setting your deductible too low. While it makes sense that you would want to be as little out of pocket as possible in the case of an insurance claim, setting a low deductible typically means that you’ll be paying higher premiums. The point of insurance is to protect against losses that you wouldn’t be able cover yourself, not to completely pay for every loss you incur. If you can afford to cover the first $500-$1,000 of a claim, you’ll save money on your premium.
Don’t skip on renters insurance. It may seem unnecessary, but renter’s insurance covers your possessions in case of theft or insured disaster, like fire. Not only is renter’s insurance relatively inexpensive, but most insurance companies will bundle a renter’s policy in with auto insurance for a low monthly cost, which could result in a multi policy discount as well.
Don’t assume that just because you have insurance you’re covered for any loss that may come up. Understanding what exactly your insurance policy covers is important. Make sure that you actually read your insurance policy and contact your agent if you have questions about what you’re covered for to avoid unpleasant surprises later.
Even though shopping for insurance can seem like a daunting task, it doesn’t always have to be. Hopefully these tips will help to make your shopping experience easier whether you’re purchasing insurance for the first time or even renewing your policy for the 20th time.