When looking for insurance, you may be tempted to cut down on coverage or eliminate critical coverages entirely in order to save money. However, be cautious; you may find yourself critically underinsured and forced to pay a large sum in the case of a tragedy. You didn’t save money in the end; you lost money. The following are the five most frequent insurance blunders consumers make. The Insurance Information Institute provides this information.
The blunder: Insuring a property for its market worth rather than the cost of reconstruction.
Why you shouldn’t: As real estate values fall, some homeowners may believe they may lower their house insurance premiums. However, insurance is meant to cover the expense of reconstructing a property, not the purchase price. Whatever the situation of the real estate market, you should make sure you have adequate coverage to totally rebuild your house and replace your things.
Raising your deductible is a smarter way to save. A $500 increase to $1,000 might save you up to 25% on your premium payments.
The blunder: Choosing an insurance provider only on the basis of pricing.
Why you shouldn’t: Choosing a provider with competitive pricing is critical. However, be certain that the insurance you pick is financially stable and has excellent customer service.
A better method to save is to check a company’s financial health with independent rating organizations (some well-known ones: A.M. Best, Moody’s), and to ask friends and family members about their insurance experiences. Choose an insurance provider that will react to your demands and will process claims in a fair and timely manner.
The blunder: not purchasing flood insurance.
Why you shouldn’t: Flood damage isn’t covered by most homeowner’s or renter’s insurance plans. The National Flood Insurance Program (NFIP) as well as certain commercial insurance firms provide coverage. You may not realize you’re at danger for flooding, but bear in mind that low-risk locations account for 25% of all flood losses. Flooding may also be caused by annual weather patterns, such as spring runoff from melting winter snows.
A better approach to save: Before buying a house, check with the National Flood Insurance Program to see whether it’s in a flood zone; if it is, you may want to consider moving to a less dangerous region. If you already live in a flood zone, check into flood mitigation measures that might help minimize your risk of flooding and consider buying flood insurance. FloodSmart.gov provides more flood insurance information.
The blunder: Buying just the minimum amount of liability insurance for your vehicle.
Why you shouldn’t: The bare minimum is all you can get away with under the law. As a result, obtaining the bare minimum of liability insurance means you’ll end up paying more out of cash later. And if you’re sued, such charges might put your finances in jeopardy.
Consider removing collision and/or comprehensive coverage on older automobiles valued less than $1,000 as a better way to economize. A minimum of $100,000 in bodily injury protection per person and $300,000 per accident is recommended by the insurance industry and consumer organizations.
The blunder: failing to get renters insurance.
Why you should get it: If you have to move out due to an insured calamity, such as a fire or storm, renters insurance will cover your belongings and extra living costs. It also protects you from responsibility in the event that someone gets wounded in your house and chooses to sue you.
Look into multi-policy discounts for a great way to save. Purchasing several policies with the same insurer, such as renters, car, and life, can save you money.
Remember to look about for an insurance agent that is reputable and in good standing with the state. Always talk to the agent about your requirements and financial capabilities. Before signing your insurance, be sure to read it thoroughly.