Common Insurance Buying Mistakes: How to Avoid Costly Errors and Secure the Right Coverage
Insurance is a crucial aspect of financial planning. Having protection in place for unexpected events such as a car accident, house fire, serious illness or untimely demise offers the ultimate peace of mind. Making sure you have the right type and level of insurance coverage is crucial to proceed with life knowing that you are covered. Despite the fact that it is often a legal requirement to obtain certain types of insurance protection, many people still commit common insurance buying mistakes. Getting stuck in these missteps can lead to inadequate insurance coverage or paying premiums that may be too high or too low for one’s needs. In this article, we will expose the most common insurance buying mistakes and provide helpful hints on how you can avoid them.
Not Researching Sufficiently
Undoubtedly one of the worst mistakes we can make is to buy insurance without doing our research. Many people simply go with the first offer they get, or they accept a recommendation from a friend or family member without even thinking to evaluate their alternatives. To avoid this problem, do your research and compare insurance providers, policies, and read customer reviews. Speak with insurance agents or brokers who can provide expert advice specifically tailored to suit you.
Underinsuring or Overinsuring
Another mistake is buying either too little or too much insurance. If you don’t have enough coverage, you’ll pay lower premiums upfront, but you risk a cash-flow crisis with a large loss. If you overbuy, you’ll pay premiums that are too high for the coverage you need. Figure out how much insurance you need based on your own particular situation and the probabilities of a loss.
Ignoring Policy Exclusions
The biggest mistake is failure to review policy exclusions prior to purchase; learning after the fact that certain claims aren’t covered can be a very unpleasant awakening. Policy exclusions are events and circumstances for which a policy does not provide coverage. Study these aspects of your policy documents – read and reread them. If anything causes confusion, ask your provider or agent.
Neglecting to Bundle Policies
Even if you get great deals on each one, buying insurance from several different providers will almost always be far more expensive than bundling your insurance policies with a single provider. You might find it beneficial to combine your home and auto insurance policies, or your renter’s and auto insurance, or multiple vehicles under one policy, for instance, which can often result in considerable discounts.
Overlooking Discounts and Benefits
And modern insurance companies often provide a number of discounts and benefits that their policyholders might not be aware of – for example, savings for safe driving, having a security system installed, being a loyal customer or having a good credit score. Always ask about available discounts, and take cut-rate margins when you can.
Not Reviewing Policies Annually
As time goes on, you may experience life events that affect your insurance needs, such as getting married, buying a house, having children, or changing jobs. Without annually reviewing and adjusting your insurance policies, you may be underinsured or not taking full advantage of available savings. Therefore, it is best to make time once a year to review your policies with your insurance company.
Therefore, knowing your priorities and avoiding some of the classic mistakes in buying insurance can help you protect your finances and ensure that you have the right cover for your circumstances. It pays off to do your homework, to compare policies and to read the fine print. Ask questions. Get advice. When in doubt, hire a professional. Then, go back and review your policies every year or so, and make adjustments where necessary. Get out of the mindset of just buying insurance because it’s required, or because you think you need it. Be proactive, thoughtful and informed. Insurance is important. It’s an investment in your financial security, and ultimately it’s about benefiting you. The better the coverage you buy, the more you’ll get out of it.
