Insurance Mistakes to Avoid

The problem with insurance coverage is that it is almost impossible for the layman to understand; most policy documents read like stereo instructions combined with IRS tax forms. Yet, despite the idiosyncrasies associated with insurance coverage it is something everyone needs. From health care to automobiles to homes and boats, insurance is there to protect owners and renters against loss, theft or acts of God. However, thanks to the confusing nature of insurance forms, some mistakes are common, but also commonly avoidable once you know what they are.

1. Opting Out

Some people decide that the insurance process and excessive documentation is not worth the hassle, opting out of coverage altogether. While they might save some money on premiums in the interim, there usually comes a time when insurance comes in handy; and it is usually right after accident or natural disaster. The average consumer usually does not have enough cash on hand to make himself whole after a catastrophe, and not having adequate resources or insurance can be more traumatic than the event itself.

2. Over Insuring

Unlike someone who opts out of coverage, the flip side of the insurance coin is the individual who opts for the maximum amount of coverage on everything; buying multiple overlapping policies, overpaying for premiums in the process. It is indispensable to consult an insurance expert regarding the coverage you actually need versus what you can live without. For example, long-term care insurance would typically not be suitable for a fit and healthy 20-year-old, but it would be a valid option for someone approaching the 65-years of age marker. Over insuring yourself and overpaying for premiums is never a smart habit to fall into.

3. Under Insuring

This is nowhere near as careless of a mistake as opting out altogether, but can be costly all the same. Take stock of the maximum allowable limits and payments offered by your insurance companies, and make sure you have enough liquidity of your assets to cover any deductibles. If your coverage meets the requirements without a gap, you probably have the right amount. However, if you have a $1,000 car insurance deductible and only $250 to your name, you are asking for trouble.

4. Not Shopping Around for a New Policy

If you make a habit of shopping around for the best price on a sweater, the same philosophy should hold true when it comes to shopping for an insurance policy. Make a point to shop policies each time your current policy comes up for renewal. Doing this will ensure you aren’t overpaying for coverage and make sure that you are maximizing all of your available discounts. In most cases, whatever time you spend shopping around for a new policy will more than make up for itself in cost savings.