Not having adequate insurance coverage is one of the most common financial mistakes people make today. It’s important to realize that insurance protects your assets and finances in an accident or another bad situation.
However, due to a lack of understanding people make mistakes when it comes to getting insurance.
45% of the insured terminate their policy prematurely and doing so is risky as it can have an impact on you or your beneficiaries financially.
Here are some common insurance mistakes to avoid, no matter what cover you take out.
No matter what insurance policy you are getting, it’s essential to shop around. However, it’s not the starting point. First, you need to learn about insurance, including why and how it works. Insurance may not be the most exciting topic, nor is tax, yet you need to know your obligations every year without paying more than you need to.
With insurance – not all policies are the same, nor are the fees. For example, cheap life insurance may be all you need however you won’t know for sure unless you do your research. Like tax, you will want to avoid paying more than you need to.
Even if you’re already insured and your policy is up for renewal, don’t just accept the renewal price – use comparison sites and search the internet to see if you could be getting the same coverage from another insurance company at a better price.
Since insurers don’t tend to reward loyalty, there’s really no point in staying with the same insurance company for several years unless they are consistently coming out with the best quotes.
Getting the Wrong Insurance:
Another way to get caught out with insurance is by having the wrong type of insurance for your needs or you could end up with too many policies that you don’t actually need.
Buying policies that you’re not likely to use can seem like a wise idea – mainly if the salesperson talked you into it – but it can be a colossal waste of money over time.
The same goes for add-ons; when you buy an insurance policy for your car. For example, you’ll probably be asked if you want to opt into a range of add-ons – be sure to read through them carefully and determine whether or not they are actually going to be of any use to you. If you’re unlikely to ever use them, it’s probably best to leave them and go with what you need.
Bear in mind that most insurance policies can always be modified later on if your circumstances change.
Over or Under Insuring Yourself:
Over and underinsuring yourself is another common insurance mistake that will likely cost you.
For example, if you’re getting life insurance don’t be tempted to insure yourself for far more than your salary is worth or the value of the mortgage on your home. You’ll end up paying more than you need to – and if your situation changes in the future and you end up earning more, you’ll always be able to make changes to your insurance policy when needed.
An example of a change in circumstances may include buying an investment property. Ensure your life insurance is enough if you die prematurely. Loans can be repaid from the life insurance payout.
On the other hand, under-insuring can be even more costly if you need to make a claim and realize that the money paid out will not cover basic expenses.
When taking out an insurance policy, you should always consider the minimum amount that will be paid out when necessary and work out whether or not that would be enough for you or your family.
Insurance is absolutely crucial these days – deciding not to have insurance could cost you dearly. You need essential health, home, car, and life insurance at the very least to make sure that you and your family are financially protected from any emergencies.
If you’re thinking of getting a new insurance policy, avoid making these common mistakes. Shop around and understand the policy size that you need first.