Avoid these common mistakes and you will get the best insurance according to your needs and budget. Saving money feels good. And shopping around when you are looking for insurance coverage is a great way to do it. However, simply reducing your coverage or dropping important coverages altogether is like diet without exercise—focused only on numbers, not on results. Don’t risk ending up dangerously under insured and on the hook for much bigger bills in the event of a disaster.
These are the most common auto, home, flood and renters insurance mistakes people make, along with suggestions to avoid those to save money:
Selecting an insurance company by price alone
It is important to choose a company with competitive prices. But be sure the insurer you choose is financially sound and provides good customer service.
A better way to save: Check the financial health of a company with independent rating agencies, and ask friends and family members about their experiences with insurers. Select an insurance company that will respond to your needs and handle claims fairly and efficiently.
Insuring a home for its real estate value rather than for the cost of rebuilding
When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings. No matter what the real estate market is doing.
A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25 percent on your premium payments.
Neglecting to buy renters insurance
A renters insurance policy covers your possessions and additional living expenses. If you have to move out due to an insured disaster, such as a fire or hurricane. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.
A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto and life will generally provide savings.
Only purchasing the legally required amount of liability for your car
The minimum is just that, the least you can get away with by law. So buying only the minimum amount of liability means you are likely to pay more out-of-pocket later. And if you are sued, those costs can jeopardize your financial well-being.
Dropping flood insurance
Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. You may not be aware you’re at risk for flooding, but keep in mind that 25 percent of all flood losses occur in low risk areas. Furthermore, yearly weather patterns, spring runoff from melting winter snows can cause flooding.
A better way to save: Before purchasing a home, check with the NFIP to determine whether a property is situated in a flood zone. If so, you may want to consider a less risky area. If you are already living in a designated flood zone, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance.
