Basic Insurance Mistakes to Avoid in 2021

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Basic Insurance Mistakes to Avoid in 2021

Choosing insurance that covers all your insurance needs is, no doubt, a difficult task, but by avoiding some common mistakes, you can easily get the insurance of your choice. People who are new to the concept of insurance and thinking of getting one is more likely to make mistakes, which can later cause them very significant losses.

So, when you are planning to get insurance, these are the basic mistakes to avoid:

 

1- Not understanding policy

Reading a policy document sounds very tiresome and boring work due to all the complex terms and conditions, but it is so important to read your insurance policy papers to understand what to expect from your insurance company when you need it.

 

2- Not asking for discounts

Ask for discounts from your insurer, because there is a possibility, that there is a discount to which you are qualified. If you don’t ask for a discount your agent may not apply for them.

Different companies offer different discounts, but the most common one includes storm-proof shutters, carpooling, installing a home alarm system, etc.

 

3- Not getting insurance that fulfills your need

Figuring out what insurance plan suits you best is sometimes a difficult task. By talking to an insurance agent about your assets can help you decide on choosing the best insurance plan for you.

The policy you choose depends upon the assets you have. For example, when you are a student, a basic insurance policy is enough for you because you don’t have many assets. But, if you are a well-settled person you have to consider the maximum amount that will cover needed expenses and protects them best.

 

4- Sticking to only one insurance company

Shopping around for a new insurance policy after years two or more can have some monetary benefits. Call different companies around to get to know about their policies and see which suits you best.

Also read: How do i make a general liability insurance Claim?

 

5- Selecting an insurance company only on its price

While selecting an insurance company, you should keep a lot of factors in your mind, such as the company’s reputation, its price, ease of doing business with that company, the coverage that is provided by that company, etc.

Selecting an insurance company with low rates is a common mistake because you think you are saving money by paying low premiums, but insurance companies always find some less obvious ways to make their money back.

Check theratings of the insurance company’s customer service through the National Association of Insurance Commissioners’ Consumer Information Source. Ask your friends and family about their experiences with the insurance company and then choose the company which covers your needs and provides the stated claims honestly.

 

6- Sticking to life insurance Rule of thumbs

According to, Rule of thumb for life insurance, it is suggested to buy life insurance which is equivalent to 8-12 times of your yearly income. But you should get the insurance plan that is adequate to cover the needs of your family after your death.

If two people have the same salary, it does not mean that they should get equal life insurance. For example, if a person is the only earner in his family and has several school-going kids, his family will be in more need of money after his death than to a family of a person, who has a working spouse and kids in college.

 

7- Insuring your home for its market value

Ensuring your home on the base of the market value of your house is a common mistake many people do. A lot of people get confused when they are asked about how their home should be insured for.

A house should always be insured on its replacement cost rather than its real estate value. Replacement cost us the most that would cost to completely rebuild your house in case of extensive damage.

According to Lynne McChristian, a representative for the Insurance Information Institute for Florida, a home’s market value has nothing to with its rebuilding cost.

 

8- Not purchasing flood insurance

Floods are a natural disaster, which causes so much damage in terms of cost. If you think, you live in an area where the risks of floods are not that high, and you do not need flood insurance, then you should know, that about a quarter of claims for flood insurance comes from the areas that aren’t high risk for floods.

Flood insurance ensures financial protection to your property that is damaged during the floods. Not purchasing flood insurance can be a serious mistake you can do when buying insurance because basic home insurance does not cover the damages caused by a flood before buying insurance for floods talk to your agent and get an idea of the cost of flood insurance, it’s coverage and how much coverage to buy.

 

9- Skipping renters insurance

Every tenant should get renters insurance, because the landlord’s insurance does not cover the tenant’s belongings, in case of any accidents. Renters insurance helps both parties; tenants and landlords, by protecting their belongings.

A renters insurance covers losses that to the belongings of tenants, due to thefts, during natural disasters, destruction of property, etc. If a tenant, who doesn’t have any renters insurance, has to pay out of his pocket if any of the above accident occurs, this can cause him some serious financial instability.

 

10- Buying the minimum amount of auto liability insurance

Every state has some minimum amount of auto insurance, which is compulsory for every driver. But buying state minimum auto insurance is liability only, which means that if any accidents occur you have to pay for your repairs and your medical bills, which can leave you in serious financial instability.

Also on buying minimum insurance for your vehicles, insurance companies give you a push one-month policy, which means that your policy renews every month. They can charge you different rates every month which can cost you more money.

That’s why always try to buy a policy which is a year-long or at least six months long. This can help you to a constant rate for some period, regardless of the change in the price of that policy in the market.