The Top 10 Mistakes People Make With Insurance

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

This is especially true for people who are trying to choose the right insurance product, from vehicle insurance to life insurance 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!*

Mistake 1: Failing to Shop Around

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

Insurance companies vary, and how they choose to assess risk can mean that the quotes you receive can also be different — sometimes dramatically so. Although most insurance companies use similar information (such as where you live and your claims history), how each company chooses to weigh these factors could have an impact on how much you are quoted.

State laws govern how insurance companies operate, so where they — and you — are located can also have an impact. The bottom line for your bottom line is that it pays to shop around.

Mistake 2: Not Asking Questions

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. Ask questions! They should be happy to take the time to explain things — if they aren’t, that’s a red flag.

This is especially important when it comes to understanding what is included in your coverage and what is excluded. It can be stressful and frustrating to experience a loss and find out afterward that some or all of it is not covered.

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.

Mistake 3: Not Telling the Truth When Applying for Coverage

File this under, “We shouldn’t even have to say this,” but please, tell the truth when you are applying for any insurance coverage! Intentionally misrepresenting your circumstances simply isn’t worth potentially saving a few bucks.

Here’s why: Whether it’s for a term life policy or vehicle coverage, insurers have access to a wide range of databases to verify the information you provide during the application process. If they uncover any inconsistencies, you may be denied coverage. That can become a real problem because some insurance applications will specifically ask if you’ve ever been denied coverage — and you could find yourself in a negative loop of one denial of coverage after another.

Even if you manage to get away with lying on your application and have a policy, if you ever have to file a claim and it is discovered that you lied on your application, your claim will almost certainly be denied while also resulting in your insurance carrier dropping you.

This means your record of claims will reflect a cancellation and you’ll be stuck in that same negative feedback loop of denials mentioned above.

Mistake 4: Selecting the Wrong Deductible

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 might have to pay a separate hurricane deductible for 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.

Mistake 5: Not Knowing How Much Coverage You Need

Understanding the terms being used — and asking questions when you don’t — is key to ensuring that you are getting the right coverage.

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.

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 all of your debt, your income, outstanding balance on your mortgage, and the projected education expenses for your family will give you an idea on how much life insurance coverage you might need.

It can be hard to figure out how much coverage you need. Whether you’re talking to your existing agent or shopping around, you will likely need to answer a lot of questions to determine your coverage needs. Ask your agent or talk to an Expert Agent for help finding the right insurance coverage for your needs. 

Mistake 6: Buying Too Little Coverage

Trying to save money by purchasing too little coverage can come back to haunt you in the event you need to make a claim.

This is particularly true if you need additional coverage outside of your standard policy — which can often be the case with homeowners, renters and condominium coverage. Standard policies generally carry exclusions, 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. Learn more about the basics of flood insurance here.

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.

Mistake 7: Buying Too Much Coverage

On the other hand, you may find yourself in a situation where you’ve bought too much coverage and are therefore paying more in premiums than you need to. Some people prefer the peace of mind that comes from having insurance for every situation, and if that’s important to you then paying extra might be worth it.

The good news is that insurance is priced based on risk. If, for example, you don’t live in an earthquake-prone area but decide that you want to have earthquake coverage, it will likely be fairly inexpensive.

However, it’s still coverage you probably don’t need to carry. Over time, those extra premium payments will add up.

Mistake 8: Failing to 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 current circumstances. 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. When a family is young, having life insurance is highly recommended — especially if the family depends on a single 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.

Mistake 9: Not Asking About Discounts or Ways to Save

There are many ways to potentially save on your insurance. “Bundling” your insurance policies is one of the most common ways to see if you can save money on insurance for those who 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 things like adding “smart home” technology that is designed to alert you to maintenance issues before they become pricey claims. Smart devices can do things like alert a homeowner when there’s a small issue like a drip — before it causes significant and expensive water damage to a home. 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.

Mistake 10: Not Taking the Time to Reexamine Your Needs Every Few Years

Some people stick with the same insurance company for decades. This can be great (and you might even qualify for a customer loyalty discount) if your insurer continues to be the right one for you.

However, too many people fall prey to inertia and stick with the same company just because it’s convenient. The truth is — thanks to online tools, AI-powered quotes and lots of market competition — it’s easier than ever to check and see if you’re still with the right company.

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

Just make sure that you are making an “apples-to-apples” comparison. Knowing what your current coverage is across all lines of insurance is key, along with your deductibles and any additional policies or riders you may 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. 

The Bottom Line

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.

Disclaimer: 

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