Insurance is one of the most important part of our daily lives. It provides you with a safety net wherein your most important assets are protected against accidents and disasters. Most people usually consider buying insurance to gain additional security to cover for major life events like birth, death, marriage or substantial debt purchases. Insurance itself is a complicated product and people end up making certain critical mistakes while purchasing coverage. Moreover, people don’t realize they need insurance until its too late. Here are a few common mistakes people make while buying insurance products.
- Don’t delay the purchase – This is the worst and primary mistake people make as far as purchasing insurance is concerned. Waiting to buy coverage is like standing around for a disaster to happen. It is important to take action right at the outset instead of delaying the process till a critical point in time. Accidents by definition are unpredictable and therefore home and auto insurance policies need to be purchased as soon as you make the first down payment. It is advisable to purchase life insurance as soon as you can afford it simply because the older you grow, the costlier the policy gets. The same principle applies for health insurance as well.
- Don’t buy the cheapest coverage – The cost of coverage is important when you choose to buy insurance and the less costly the policy is, the more appealing it might seem. You must always remember that the cheapest policy isn’t the best and the best policy isn’t the cheapest. There is no point in compromising the extent of coverage in order to save a few dollars. You just might end up spending more than you have saved in case you meet with an accident which results in the loss of life or an asset. Cheaper policies might not provide coverage for certain events or exclude certain provisions which might be necessary. The best idea is to talk to an agent and find a policy which strikes the appropriate balance between cost and coverage.
- Don’t miss or skip payments – As most of you already know, depending on the situation, there are some insurance policies which you just can’t do without. In the United States, it is an offence to be driving without auto insurance and you may be charged with a civil offence. Banks and mortgage companies also require homeowners to carry a certain amount of coverage. Missing a payment entirely or making late payments can lead to the cancellation of your policy or have adverse effects on the premium rate during renewal.
- Don’t forget to update your policy – Your assets and their values don’t stay constant through the years. Some assets like houses and fine art appreciate in value through time while other like vehicles and health depreciate. In case you forget to review your policy, you might end up omitting coverage for something extremely important. You also need to get your assets appraised before you decide to update you policy.
- Don’t think you have enough coverage – One of the leading insurance companies conducted a survey recently and conclusively illustrated that most people think that they have the perfectly adequate amount of coverage. In reality, people are covered minimally and are prone to financial disasters triggered by loss. Review you policy from time to time and adjust the amount of coverage according to your growing needs. Don’t forget to consider long term costs (like retirement and children’s tuition) when you purchase a policy.
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