Common insurance mistakes & how to avoid them

We’re all human, and we all make mistakes. 

This is particularly true for those selecting insurance, from car to life coverage. Sometimes these mistakes could end up costing a lot of money.

We want to help you avoid potentially expensive slip-ups. Here’s a list of the top 10 mistakes people make with their insurance products — and how to avoid them. Correcting these mistakes could potentially save you money!

Only getting one insurance quote

Whether you are getting your first-ever homeowners policy or your 10th auto insurance policy, comparing quotes is a must.

Insurance companies differ in how they evaluate risk. This can result in quotes coming back a bit different from each insurer.

Insurance companies may consider similar factors, such as your location and claims history. However, the way they prioritize these factors can affect the amount they quote you.

State laws govern how insurance companies operate. The location of both insurance companies and you can also impact your quote. The bottom line for your bottom line is that it pays to shop around.

Ask more questions when getting quotes

You need to understand your insurance coverage, it’s as simple as that. Don’t allow your agent to move past a topic if you don’t understand it. It’s a good idea to ask questions. Your agent should be happy to take the time to explain things — if they aren’t, that’s a red flag.

Understanding what is included in your coverage and what is excluded is especially important. Losing something and discovering it’s not insured can be stressful and frustrating.

Every industry has its own jargon. You are not expected to know every insurance term. If you hear a word or phrase you are unfamiliar with, ask about it.

Errors on insurance applications

Please be as honest and accurate as possible when applying for insurance. It’s important and shouldn’t even need to be said. Intentionally misrepresenting your circumstances simply isn’t worth potentially saving a few bucks.

Insurers can check the information you give them by using various databases. This applies to both life insurance and car insurance. If they uncover any inconsistencies, you may be denied coverage.

This can pose a big problem because some insurance forms inquire about previous coverage denials. You might end up stuck in a cycle of getting denied coverage over and over again.

If you lie on your application and get caught, your claim will be denied and you may lose your policy.

This means, if you cancel, your claims record will show it and you’ll be stuck in a cycle of denials.

Selecting a deductible that’s too high or too low

Carefully consider how much you’re willing to spend as you choose your deductible. There are a lot of things that factor into this decision. 

A higher deductible will typically mean a lower premium rate, so there is an advantage to selecting the higher amount. However, you need to do the math to see if the higher deductible is an amount that you can reasonably afford to pay out of pocket.

When it comes to homeowners insurance, consider any additional policy restrictions. For example, depending on where you live, you may need to pay extra for hurricane damage caused by a named storm.

Large events like a hurricane will lead to stacked claims, which can be quite complex. It’s important to understand both your deductibles and what kinds of emergencies or disasters might cost you extra. Then you can think about how much money you can afford to pay out of pocket when you file a claim.

Not knowing how much insurance coverage you need

To make sure you have the right coverage, it’s important to understand the terms used and ask questions when you don’t.

For auto coverage, this means knowing what liability, comprehensive and collision coverages are. If you have a new car that you are making payments on, the lienholder will likely require you to carry comprehensive coverage.

However, if you own your vehicle outright, your state might only require you to carry liability coverage. This means that it’s up to you to decide whether to purchase comprehensive and/or collision coverage. For most drivers, having both is a good idea.

Rental car reimbursement is an additional feature that can be included in your standard comprehensive collision car insurance policy. By opting for this coverage, your insurance provider may take care of the expenses associated with renting a car in case your vehicle breaks down or requires repairs following an accident.

When it comes to homeowners or renters insurance, your agent might ask about things like jewelry, art and electronics. That’s because these items are expensive and potential targets for burglary, so you may need separate coverage for them.

For life insurance, a good first step is to examine your situation according to the DIME method. DIME stands for:

• Debt
• Income
• Mortgage
• Education

Adding up your current and the projected expenses for your family will help you understand how much life insurance coverage you might need.

It can be hard to figure out how much coverage you need. When speaking with your agent or comparing options, you will likely need to answer numerous questions. These questions will help determine the coverage that is suitable for you. Ask your agent or talk to an Expert Agent for help finding the right insurance coverage for your needs. 

Buying policies with too little coverage

Not buying enough coverage to save money can cause problems if you need to make a claim later. Standard policies generally carry exclusions. These are events that might happen that your insurance will not cover.

For many of these exclusions, you can purchase separate coverage specific to those situations. A common one is flooding, which is excluded specifically because the risk is so high. So finding and buying coverage that will protect your home in the event of flooding is up to you.

You can purchase too little insurance for your vehicle by choosing not to carry comprehensive coverage, for example. But this means that if something happens to your vehicle that is not the result of a collision — such as weather damage or theft — you will be paying out of pocket for the repairs or a replacement vehicle.

Buying policies with too much coverage

If you have too much coverage, you might be paying more than necessary in certain situations. Some people prefer the peace of mind that comes from having insurance for every situation. If that’s important to you then paying extra might be worth it.

The good news is that insurance is priced based on risk. For example, you don’t live in an earthquake-prone area but decide that you want to have earthquake coverage. This could end up adding an unnecessary cost to your policy. Over time, those extra costs will add up.

Update your coverage when circumstances change

“Set it and forget it” works for a lot of things, but not your insurance coverage. Insurance is priced based on your situation. When those circumstances change, your insurance needs could change, too.

This is true for most types of insurance products, but life insurance is an easy example. It’s important for young families to have life insurance, especially if they rely on one income. After children complete their education and are out on their own, the need for life insurance lessens.

Other changes could mean you need more insurance. When those children become teen drivers, you’ll need to add them to your insurance. Here are some additional questions to consider:

• Did you just get married?
• Are you planning to move?
• Did you get an expensive piece of jewelry or electronics as a holiday gift?
• Did you add a “pandemic puppy” to your household?
• Have you decided to build an addition onto your home?

All of these are examples of routine life changes that will adjust your insurance needs. Talk to your insurance agent or connect with an Expert Agent if you have questions.

Ask about discounts or ways to save

There are many ways to potentially save on your insurance. Bundling your insurance policies is a common way to determine if you can save money on insurance. This is especially true when you have multiple coverages. 

You may be able to save on your premiums if you bundle multiple policies with one insurer. Of course, that means that the insurer must offer the types of insurance you are bundling.

This is where you might need to do a little bit of homework, because while most people may be able to save by bundling their policies, some people might do better having individual policies with separate insurers.

There are other ways to potentially save, too. Talk to your insurer about adding “smart home” technology designed to alert you to maintenance issues before they become pricey claims.

Smart devices can alert homeowners to minor issues, like a drip, before it causes expensive water damage in their homes. These devices can detect and alert homeowners about small problems.

By doing so, they help prevent the occurrence of costly water damage. This proactive approach allows homeowners to address the issue promptly and avoid any potential financial burden. Adding burglar alarms and security systems could also save you money on your insurance.

For those with car insurance, completing a safe driver course could yield a discount on your premiums. And if the pandemic has changed your commute because you’re now working from home on all or most days, you might be eligible for a low-mileage discount.

There are many programs and ways to potentially save, so make sure you’re taking advantage of them by asking your agent about all of the discounts you might qualify to receive.

Reexamine your needs every few years

Some people stick with the same insurance company for decades. If your insurance company is still the best for you, this is good. Additionally, you may get a discount for being a loyal customer.

However, too many people fall prey to inertia and stick with the same company just because it’s convenient. Checking if you’re still with the right company has become easier than ever. This is due to the availability of online tools, AI quotes, and market competition.

Carving out the time to investigate other insurers doesn’t have to be overwhelming. It’s worthwhile to check from time to time, because you could potentially save a lot of money.

Just make sure that you are making an “apples-to-apples” comparison. It’s important to know your insurance coverage, deductibles, and any extra policies or riders you have. 

Better yet, let an Expert Agent do the comparison-shopping for you. Comparing quotes across multiple carriers will help you find the right rate to fit your budget. 

How can I get an insurance quote today?

Everybody makes mistakes. But mistakes on your insurance could cost you a lot of money you don’t need to lose. Take the time to review this list and address any problems now — it will benefit you in the long run.

Do you want to get an insurance quote for home, life or auto? Get in touch with our team to learn more about available options and apply today!

Disclaimer: 

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate Insurance does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate Insurance. Rate Insurance does not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.