Few people enjoy thinking about their insurance needs, shopping for coverage, or
reading through a policy’s fine print. Once they do buy a policy, many people rarely think about it again, other than when they pay the premiums. But that tendency to avoid thinking about insurance can lead to insurance mistakes that can put a person’s assets at risk. Below are some of the most common
Expecting the best — Some people may think they can skip various types of essential insurance (like auto or health insurance) because it won’t happen to them. Or they may buy a bare-bones policy thinking they won’t ever need to make a claim. But the reality is that accidents and injuries can happen to anyone. A comprehensive insurance plan protects you when they do.
Not shopping around — If you’re in the market for a new policy, shop around and compare prices to get the best deal. But make sure you’re comparing equivalent policies and coverage — an ultra-cheap policy may offer skimpy benefits.
high premiums for insurance coverage you don’t really need, you’re wasting money. What types of insurance might you skip? Extended warranties, cell phone insurance, insurance for specific diseases (like cancer), rental car insurance, and mortgage life insurance are usually not worth the premium you pay.
Not negotiating on insurance rates — Here’s a little-known tip: The premium price you’re quoted isn’t set in stone. Depending on the type of coverage you need, you may be able to get discounts based on your profession, the age of your car, installing an alarm system in your home, choosing a higher deductible, and more. Bundling — buying several policies through the same carrier — can also lead to premium price breaks.
Forgetting to pay the premium — It’s a simple but potentially devastating mistake. Missing premium payments could cause your policy to lapse, leaving you without coverage. Reduce the risk of this happening by automating your payments.
Dropping coverage to save money — When your budget is tight, dropping insurance coverage may seem like a good way to save cash. You may save money in the short term, but you could end up worse off in the long term if you need to make a claim. If premium payments are straining your budget, consider raising your deductible or asking your insurer if you’re eligible for any discounts.
Forgetting to update life insurance beneficiaries — As your life changes, so should the people named as beneficiaries on your life insurance policy. Divorce, remarriage, the death of a spouse, or the birth or death of a child are all times when you should update these designations. If you fail to take this simple step, your life insurance may not do its job when you need it most. After all, do you
want your insurance benefits to go to your ex-spouse or have one child receive a generous insurance payment while the other receives nothing? Keeping your beneficiary designations up-to-date can help you avoid those outcomes.
Having coverage gaps — Everyone faces different risks, and thus has different insurance needs. Sometimes, it’s easy to overlook a risk until it’s too late. For example, if you live in an earthquake-prone area, you likely need separate earthquake insurance. If you serve on a nonprofit board of directors, you may need personal liability coverage. If you own ATVs, snowmobiles, or other vehicles, you may need special policies to protect yourself in case of damage to the vehicle or a lawsuit. The list of possible risks goes on and on.
Not researching an insurance company before you buy — Not every insurance company is created equal, and what looks like a great deal today may be less appealing tomorrow when you are struggling to get a claim processed quickly. Before you buy, get multiple quotes, read the policy’s fine print, review the insurer’s complaint record with the state department of insurance, and check the company’s ratings with ratings agencies like Fitch, Moody’s, and A.M. Best.
Not thinking about insurance as part of your overall financial plan — Insurance isn’t something you should think about in isolation. In fact, it’s an essential part of your overall financial plan. A solid risk management strategy protects your hard-earned wealth and your family’s future.
Please call if you’d like to discuss insurance in more detail.