Choosing Low Deductible Plans
Setting low deductibles typically means your premiums will be higher, sometimes leading to paying more than you can recover in claims. Low deductibles may also encourage to you to file for smaller claims, which could lead to additional increases in premiums, or even the loss of your coverage. Instead, increase your deductible and add some of that savings to your emergency fund to cover the extra out-of-pocket expense.
Not Asking for Discounts
You will never know what discounts a company offers if you don’t ask. Many insurance companies will offer discounts for things like installing a home alarm system, taking a job with a shorter commute (or not commuting at all), or even working in certain occupations (these can include teachers, first responders, or military service members to name a few).
Staying Too Loyal to Your Insurance Company
Your insurer may have had the best rate for you when you signed up, but could no longer have the best deal. Whenever you experience any major change (like getting married, moving to a new state, buying a home, having a teenager start driving, or retiring) get quotes from several insurers to look for the best deals. It’s also good to rate shop whenever you are hit with a rate hike.
Looking Only at Cost When Selecting Insurance
Price should not be the only factor when looking for a good deal. While it’s a good idea to shop around every few years, switching insurers just to save a few dollars can backfire. Look up reviews on the insurers, how easy they are to deal with when filing a claim, and their customer insurance ratings. Saving money does you no good if your new insurer will fight you on every claim.
Signing Up for COBRA
Under the federal law known as COBRA employers are required to let you continue on their group health insurance policies for up to 18 months after you leave your job, but you will be required to pay 102% of the premium (many employers cover 50% or more for their current employees). If you’re healthy and live in a state with a competitive insurance marketplace, you could get a better deal on your own. Get price quotes in your area at HealthCare.gov.
Sticking to Life Insurance Rules of Thumb
The standard advice for life insurance coverage is eight to twelve times your annual salary. But you need to really look at the needs of each individual. Two people who earn the same income may need very different amounts of coverage. Things to consider include whether you are the sole earner, and the needs of your dependents (like childcare or college).
Insuring Your Home for Its Market Value
The market value and the insurance value are not the same. You need enough insurance to pay to rebuild your home and replace your possessions if it is destroyed, which can often be higher than the market value.
Buying Only the Minimum Insurance Required
Most states require all drivers to carry a minimum amount of liability insurance coverage. The amount ranges from state to state. However, buying only the minimum can cost you more if you are in an accident. Chances are drivers will need more liability coverage than what their state requires, and any difference will have to come out of your pocket.
Skipping Renters Insurance
When you rent your landlords insurance will protect their property, but that protection does not extend to your personal possessions. Renters insurance can protect you in case of fire, theft, flooding, or other natural disasters. Many people skip renters insurance because they underestimate the true cost of replacing all their possessions. Fortunately, renters insurance is relatively cheap, averaging $15 to $35 a month.
Not Getting Home Insurance Add-Ons
Standard homeowners insurance will cover many common threats – fire, hail, wind, and theft for example – but there are several disasters that require extra coverage. The coverage you get will depend on where you live, and the possible risks. These additional coverage could include hurricanes, flooding, or sewage.
Standard policies cover damage to your home and other structures on your property, such as a garage, barn, shed, and fencing. They will also cover furniture, electronics, clothing, and other belongings as well as your liability for people injured in your home or for damage that you, your children, and your pets cause to others.
A standard policy doesn’t cover flood damage, which can be quite expensive. If you live in a high-risk area, your mortgage lender may require flood insurance. But even if your risk is moderate to low, you should consider it because premiums are commensurately lower than standard- or high-risk coverage.
When the toilet backs up or the sump pump fails, neither flood insurance nor the standard homeowners policy will cover it. This is typically an affordable add-on to your policy.
Standard homeowners policies exclude earthquakes, but most insurers sell earthquake coverage as an endorsement or separate policy. Expect higher earthquake deductibles in more active areas.
If you own expensive antique furniture, furs, jewelry, or artwork, you should buy a special endorsement or “floater” to cover their full value in the event they’re lost, stolen, or destroyed.