Buying Insurance: 5 Common Mistakes

Buying insurance can be confusing. Do you need it? How much do you need? Can you afford it? These are just a few of the questions that arise when you think of buying a policy. This confusion can often lead to mistakes that could leave you without the right coverage of your needs. Five common mistakes given below can help you avoid them when buying an insurance policy.

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Do not assume it is expensive

According to the U.S. Census Bureau, about 30 percent of households do not have life insurance coverage and over 40 million Americans are without health insurance. The figures for other types of coverage too are high. The main reason for these alarming figures is that many consumers mistakenly think that the cost is unaffordable.

That is not really the case: doing some research will often reveal that the actual cost is lower than the cost presumed. While the premium itself may appear to be high, there are usually discounts available that will significantly reduce the cost. For example, insurance companies offer discounts on auto insurance for those who have good driving records, who are members of AARP and so on.

Do not remain insensitive to eventualities

Your family needs keep increasing forever; if you are insensitive to this fact, you may end up with inadequate life insurance. In the case of disability or long-term care, for how long should you seek coverage – a few months or a few years?

Insuring your home for the value you bought it years ago could leave you very underinsured, if property values in your area have risen.  An insurance expert will be able to help you work out the right coverage that will take care of all possible eventualities.

Do not buy insurance considering just the price

The number of clauses, the nuances of their presentation, and the actual wordings can make very confusing the comparison of insurance policies. Many consumers find that the basics of the policies of different companies are all the same. Therefore, they simply presume that it would be fine if they purchase a policy guided just by the cost factor.

More importantly, you need to consider the reputation of the company, the quality of service offered, the exclusions that could lower the policy cost and a few other factors, which appear to be rather insignificant.  For example, the higher the health insurance premium in general, the less you pay when you go to the doctor. What would work for you? Does your property coverage include food spoilage in the event of a power outage? Such considerations prove to be quite beneficial.

Do not ignore the details

Insurance policies are rather long and complex documents. This is not because they are designed to confuse consumers; it is so because of the volume of issues and contingencies to be covered. It's easy to gloss over these terms and conditions, and just look at the cost and the claim payout.

The problem is that the details may, and probably will, contain factors that could affect or reduce the payout. This is another area, where an insurance professional will be able to tell you how, when and where the details of the policy will affect the benefits.

Do not set deductibles too high

The thumb rule is the higher the deductibles, the lower the premium. High deductibles may help your monthly budget. However, in case of a claim due to an eventuality, your high deductibles are not helpful: you need to pay a substantial amount (more than you can afford) out of your own pocket. The effectiveness of the policy and the protection it ought to provide stand substantially reduced.

When buying insurance, you will do well to contact an expert insurance broker, who will be able to evaluate your coverage need and suggest the right policy, at the right price.