We explore six common mistakes people make when obtaining their insurance policies — and how to sidestep them before they cost you money.
1. Choosing an insurance company based on price alone
Choosing an insurance company based on price alone can be a costly mistake in the long run. While pricing is often essential, it shouldn't be the only measure used when selecting an insurer. Considier other factors, such as:
- Coverage options. It's important to research your options and choose a company that can keep up with your changing needs while providing the right coverage. You should consider potential coverage options carefully to ensure you get the best protection for what matters most.
- Financial strength. Knowing the provider's financial stability is imperative to ensure they can cover any claims you make. Researching a provider's financial ratings and history is essential, as this can show how well they are funded and how secure your policy with them may be. Ratings from agencies such as Standard & Poor's (S&P) or Moody's indicate a company's long-term stability and ability to pay claims in full.
- Customer service and online resources. The best way to assess an organization's values and commitment to its customers is by looking into its customer service policies, reviews from current and past customers and availability of online resources. An ideal provider should have an experienced on-call staff to answer questions promptly, as well as excellent customer reviews and helpful online content, such as clear information about product and service features.
If you don't understand your coverage options or the customer support you will receive from your provider, you could end up paying less in premiums but much more in out-of-pocket costs if something goes wrong. Therefore, making the price just one part of your overall decision is a much better option and could save you from unnecessary stress.
2. Insuring your home based on real estate value instead of rebuild costs
Insuring your home based on real estate value instead of the cost to rebuild is a misguided decision that could leave you with inadequate protection in the event of a total loss. The replacement cost for your home is usually higher than its market value. Reducing the amount of insurance on your home may seem like a good idea when real estate prices drop. Still, you should ensure you have enough coverage to rebuild your home and replace your belongings completely — no matter what the real estate market is doing.
3. Deciding to go without flood insurance
Floods can cause significant damage most homeowners cannot cover out-of-pocket. Without flood insurance, costs associated with water damage would be the responsibility of the homeowner, who could find themselves in serious financial difficulty. Moreover, with unpredictable weather patterns these days, no community is immune from flooding and its associated risks. According to Flood Management Services, the average flood damage incident costs homeowners between $2,000 and $5,000. Investing in flood insurance is a smart move for peace of mind and financial security.
4. Passing on renter's insurance
When considering renting a home or apartment, many people opt to forgo renter's insurance. After all, it's just another expense. However, renter's insurance provides invaluable protection against a wide range of potential issues — from natural disasters to burglary and even damage inflicted by your pet. Without renter's insurance, you may find yourself responsible for costs that quickly add up and cause significant financial strain.
5. Only carrying the amount of liability legally required for your car
If you are involved in an accident that results in property damage or bodily injury to another person, low liability insurance coverage limits will have you on the hook to cover the rest. Unexpected expenses after an accident can include medical bills, vehicle repair costs and, in some cases, even legal fees — all of which add up quickly. Purchasing additional coverage may incur a higher cost initially, but it has the potential to save you large sums of money down the road if you find yourself on the wrong side of a lawsuit or insurance claim.
6. Going without an excess liability policy
An excess liability policy is a critical part of any risk management plan. It provides an additional layer of coverage beyond the traditional liability policy, both in terms of limits as well as types of claims covered. This gives individuals and businesses protection from costly losses that could otherwise result from negligence or unforeseen events. With an excess liability policy, you will be able to protect your assets and quality of life should something unexpected occur. Having this extra protection is especially important for business owners and entrepreneurs, as it can help them navigate potential legal issues with greater ease and peace of mind.
Understanding the implications of all your insurance decisions is important. Taking the time to research different providers to assess their coverage options and customer service policies before committing will help ensure your decision is a wise one. Not taking these recommendations seriously could lead to considerable financial hardship if something goes wrong. If you have any questions about your current coverage or need help making an informed decision, call your insurance specialist today.