4 Insurance Mistakes to Avoid at All Costs

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  • Having sufficient insurance is crucial to protecting assets.
  • Unfortunately, many consumers make mistakes when shopping for policies.
  • Common errors include not buying enough coverage or setting the wrong deductible.

These mistakes could be costly if things go wrong.

Everyone needs insurance to protect their assets. This can include different kinds of policies, such as auto insurance in case of a car accident and life insurance in case of an untimely death.

Insurance is one of the most important purchases a person will make because without sufficient coverage, financial disaster could ensue when things go wrong. Unfortunately, it can be complicated to get the right coverage at a fair price, and it's common for consumers to make errors when buying policies.

So, how can individuals shopping for insurance ensure they don't end up making mistakes that cost them? Here are four of the biggest insurance-buying issues to avoid.

1. Buying too little insurance

It can be tempting to skimp on coverage since most people don't think they'll be the ones to suffer a disaster such as a car crash or a house fire. Buying less coverage means paying lower premiums, and this monthly savings may seem important -- especially for those on a tight budget.

Unfortunately, without sufficient insurance, a person's financial life can be devastated if something goes wrong. A driver who buys only the minimum liability insurance coverage, for example, could end up without any money from insurance in the case of a car theft -- and paying to replace a vehicle with no help could be a real financial hit.

Insurance buyers should carefully consider the level of risk they can afford to take on -- and should make sure they get enough insurance protection in place that a calamity doesn't devastate their finances for decades to come.

2. Setting a deductible that isn't affordable

When buying insurance, consumers can choose how large their deductible will be. This is the amount they have to pay personally before insurance begins paying out for losses. For example, if a person has a $1,000 deductible on their home insurance and a fire occurs, they'd have to pay $1,000 and the insurer would cover only damages in excess of that amount.

While a policy with a high deductible will be cheaper, consumers should never set their deductibles so high they wouldn't be able to afford to pay them. Otherwise, they could find themselves in dire straits when a covered event occurs and they can't afford to pay their portion of losses to get back on their feet.

3. Not shopping around for quotes

Insurance costs vary widely from one company to another. Those who don't shop around for their policies could end up paying much more than they need to in order to get protection. It's a good idea to get several quotes, and to shop around at least once a year, to make sure the policies in place are as affordable as possible.

4. Failing to review insurance coverage regularly

Finally, it's important to review insurance coverage often -- at least once a year, or when any major life changes occur. This way, consumers can make sure they still have enough coverage and that their coverage is as affordable as it can be.

By avoiding these mistakes, insurance buyers can get the protection they deserve and their families need, and can avoid paying high premiums that could eat into their budgets and make accomplishing other financial goals harder.

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