The first insurance policy was created in the United Kingdom back in the 1700s. Since then, these policies have become invaluable across the globe. In fact, the insurance market is currently worth $1.22 trillion.
This means there are loads of great policies to choose from, no matter what you need coverage for. However, it also means that finding the right plan for you can feel very overwhelming. On top of this, there are lots of insurance policy mistakes that may result in you getting expensive or poor coverage.
Want to know which mistakes to avoid with insurance? Then you’re in the right place!
Read on to find out exactly what not to do when shopping for your new insurance policy.
Shopping for Insurance Plans on Your Own
However, finding the right coverage for you can be a minefield. You may find that there is overlap between different insurance policies, which can make choosing one very confusing.
On top of this, policies and their coverage can vary between different insurance companies. For example, the home insurance provided by one insurance company might not provide the same coverage as another for the same price.
Fortunately, help is at hand. Independent insurance agents will compare multiple companies and their policies for you. Based on the coverage that you need, they will then recommend the best plan to cover you.
They will also help you find an experienced insurer with a proper license and a great reputation. And they will work with you to do this within your budget!
Not Asking for Discounts
When it comes to shopping for a better deal on insurance, it never hurts to negotiate. A lot of people don’t question an insurance price, and this means that they end up paying more than they need to.
Discussing your budget and exactly what you’re looking for with an insurance team will help you to find a deal to suit you. This also gives you the opportunity to ask about any offers they might have going.
When asking for discounts, bring up other deals that you have seen offered by rival insurance companies. If an insurer thinks they’re at risk of losing your business, they’re far more likely to offer you a discount!
Staying Loyal to Your Previous Insurance Company
One of the big problems with insurance companies is that they offer great introductory rates to try and entice new customers. However, once they’ve got you signed up for a policy, they are less committed to keeping you happy.
This is because most people see switching insurance companies as a lot of effort and simply can’t be bothered with it. Instead, they stay on poor insurance policies that cost them a lot.
Finding a new insurance policy means that you could enjoy some great introductory deals that aren’t on offer with your current one. Or your current insurer may be willing to offer a better deal to keep you loyal.
Either way, looking for a new company will be sure to help you find you a great deal.
Only Considering Cost When Choosing an Insurance Policy
It is totally normal to think about your budget when choosing an insurance policy. However, you shouldn’t only look at the price of an insurance policy.
A cheap premium can come at a cost. Some other things to consider when buying an insurance policy include:
- The length of the policy term
- The cost of deductibles
- What is covered by your insurance policy
- Whether the price of your premiums will change with time
- Anything that will impact the validity of your insurance policy
It’s also worth looking at how your premium costs are figured out. For example, you may be able to adjust the cost of your premiums to suit your financial situation. This can provide some much-needed flexibility, depending on the stability of your income.
Going for the Minimum Coverage Required
When you sign up for an insurance policy, there is no obligation to sign up for an expensive package. In fact, most companies only require you to pay for minimal coverage. This is great as it helps people to find a plan to suit their budget.
However, it’s always worth asking yourself, “what is the cost of avoiding insurance?” Getting minimum coverage might seem like a clever money-saving plan. But it could leave you in financial difficulty further down the line.
For example, a lot of people think that having homeowners’ insurance provides plenty of protection for their property. But not having flood insurance or extra coverage can leave you exposed in the case of unexpected disasters.
Some extra insurance coverage policies you might want to consider include:
- Emergency insurance
- Business insurance covering Acts of God and terrorism
- Flood insurance
- Vehicle insurance
Whenever you do sign up for a new insurance policy, it’s important to check exactly what this covers you for. This will help you spot any holes in your coverage that you need to sort out.
Relying on a Group Insurance Policy
Group insurance policies a common way of keeping your insurance costs low. These split the cost of a single policy across a group of people.
For example, when you rent a property, the building you live in should be protected by the landlord’s homeowner’s insurance. However, your property inside it won’t be, which is why a lot of people get renter’s insurance.
Rather than getting an individual policy to cover your possessions, you might like to get a group policy to cover everyone that you live with as well. That way, you all share the cost of the policy and are covered.
However, these policies often offer less extensive coverage than individual policies. They are also harder to tailor to your individual needs.
On top of this, they depend a lot on you, all having the same insurance needs for the same periods of time. Most group policies are fixed-term policies. For renter’s insurance, this means you will have to continue paying your premiums even if you move or if your circumstances change.
So being part of a group insurance policy won’t give you anywhere near the same flexibility as an individual policy would.
Providing Wrong Information on Your Application
An insurance policy is a great way of providing yourself with financial security for parts of your life that you can’t afford to go wrong, such as fire or weather damage.
For example, fire and lightning damage can create nearly $80,000 worth of damage to your home in one go! This isn’t the kind of money that most people have lying around.
However, having proper coverage from your insurance policy relies on you doing some very important things:
- Paying your insurance premiums on a regular basis
- Providing accurate information on your insurance application
- Updating your insurance application when necessary
Your insurer will use the information that you provide to work out how much they can expect to pay on an insurance claim. This determines what your premiums will be. If you do not provide accurate information, then this could make an insurance claim in the future invalid.
For example, if you want to join the other 70 million Americans with homeowner’s insurance, you will need to provide information about:
- The size of your property
- When it was built
- Any history of works it has had done or previous issues, including electrical, structural, and plumbing issues
- Details of anything you do to maintain the property, such as annual electrical checks
- The value of the property
Obviously, older properties or ones with a history of structural issues are more likely to encounter issues in the future. So policies for these properties will have higher premiums. Failing to disclose this sort of information, even if you do it accidentally, could make a future insurance claim invalid.
Not Getting Enough Coverage
Having insurance is extremely important, but it can provide a false sense of security. This is why it is important to check how much coverage you need on a regular basis.
When applying for your policy, take the time to discuss everything that you want to protect with an insurance policy. This will help your insurer make sure they’ve covered every base.
However, if you come into more money or property or your situation changes, make sure to take another look at your policy. The last thing you want is to find out that you’re not covered by out-dated insurance.
Improperly Designating Beneficiaries
Some insurance policies give you the option to name a beneficiary of the policy. This is someone who isn’t the policyholder but who can receive an insurance claim payout. This means that if you aren’t around to receive an insurance payout, someone close to you will.
For example, if you take out a homeowner’s insurance policy lasting 40 years when you are 60, this may cover the property after your death. In that case, it’s a good idea to name the beneficiary as the person who will inherit your home.
If you do have to name beneficiaries, it is important that you designate these properly. This includes:
- Naming a beneficiary by their full name on your policy.
- Provide at least two back-up beneficiaries.
- Not naming minors as beneficiaries.
- Requesting a written statement every three years detailing the status of the beneficiaries named in your policy.
During the course of your insurance policy, you will be able to change the name of a beneficiary if you want to. However, make sure that you always do this in writing and always request confirmation of this from your insurer.
Not Reviewing or Updating Your Policy
Insurance policies are usually designed to provide long-term coverage. However, this means that a lot can change in your life during your insurance term.
Because of this, it is important to review your policies regularly and updated them where necessary. For example, you may want to get more coverage if you extend your home.
Every two to three years, it’s a good idea to request a written statement outlining the details of each of your policies. This means you will be able to review the latest version of your insurance policy and make any changes necessary.
If you do want to update your policy, make sure you contact your insurer in writing about this. That way, you have a written record of any changes that should have been made to your policy.
Not Shopping Around for a Deal
If you don’t do your research, it is almost impossible to know if you’re getting a good deal or not. Getting insurance quotes to compare online is easier than ever before, and a lot of companies will talk you through your options for free.
When shopping around, asking lots of questions doesn’t mean you have to buy a policy with that company. In fact, any decent insurer should be happy to answer your questions without pressuring you to make a decision straight away.
After all, you are the one who needs an insurance policy to rely on. So don’t feel the need to rush.
How to Avoid Insurance Policy Mistakes
As you can see, there are plenty of mistakes that you can make when shopping for a new insurance policy. Fortunately, knowing them will help you find the right policy to suit you.
Here a just a few of our other top tips for finding great insurance coverage:
- Do your research into different kinds of insurance available.
- Make a list of what you want coverage for before you start shopping.
- Listen to previous customers’ experiences.
- Always read the small print of a policy before signing it.
- Remember that, when it comes to insurance coverage, quality is key!
Once you have signed up for an insurance policy, set regular reminders to review it so that you always have the coverage you need.
Get Help With Your Insurance Policy
When it comes to finding the right coverage for you, there are plenty of insurance policy mistakes to avoid. Keep these in mind, and you’re sure to find a policy and a price that suits you.
To get started with your insurance coverage, get in touch with a member of our team today. We’re here to help!