Five Insurance Mistakes to Avoid...
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June 2016Avoid these Common Mistakes and You’re on Your Way to Getting the Best Insurance for Your Needs and Budget
Saving money feels good. And shopping around when you’re looking for insurance coverage is a great way to do it. However, simply reducing your coverage or dropping important coverage altogether is like diet without exercise—focused only on numbers, not on results. Don’t risk ending up dangerously underinsured and on the hook for much bigger bills in the event of a disaster.
Following are the five most common auto, home, flood and renter’s insurance mistakes people make, along with suggestions to avert those pitfalls while still saving money (we call them, “better ways to save”):
1. 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.
2. SELECTING AN INSURANCE COMPANY BY PRICE ALONE. A new business is a big target for thieves. New computers, furniture and other office equipment is worth more at a pawn or chop shop than older equipment. Even older businesses that have just undergone renovations and upgrades are a target. Replacement insurance protects a business in the event equipment is stolen, replacing the missing items and paying for repairs from damage caused by the invasion.
3. 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, for example—can cause flooding.
4. 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.
5. NEGLECTING TO BUY RENTERS INSURANCE. A renter’s 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.
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Source: iii.org
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