Insurance is like a safety net, providing peace of mind and financial security when life takes an unexpected turn. Whether you're an individual or a business owner, the right insurance coverage is crucial.
Insurance, however, is a complex topic, and it can be easy to make mistakes that ultimately put a dent in your finances.
“Insurance is a crucial component of your financial strategy. Avoiding common insurance mistakes will not only save you money but also ensure you have the right coverage when you need it most,” says Kyle Dean, President & CEO of Dean & Draper.
Dean says these are 17 common insurance mistakes people make when choosing coverage and how to avoid them:
Mistake: Insurance rates can vary from company to company. It is important to shop around and compare rates before purchasing a policy.
Solution: Get quotes from multiple insurance companies before you purchase a policy. You can also use an insurance broker to help you compare rates.
Dean says to remember to keep in mind that while it's important to choose a company with competitive prices, you will also want to partner with a company that will be responsive to your needs and handle claims in an efficient and fair manner.
Mistake: One of the most common insurance mistakes is underestimating your coverage needs. You might opt for the bare minimum to save money, but if you do not have enough coverage, you could be responsible for paying out of pocket for losses that are not covered by your insurance policy.
Solution: Assess your unique circumstances with your insurance broker and opt for comprehensive coverage that adequately safeguards your assets and future earnings. Cutting corners today may leave you vulnerable tomorrow.
The Insurance Information Institute (iii) says a prime example of underestimating your coverage needs is for a homeowner to insure their home for its real estate value instead of the cost of rebuilding.
“You should always have enough coverage to completely rebuild your home and replace all your belongings in the event of a disaster,” says Dean.
Mistake: You make a big lifestyle change, such as purchasing a new home or car, and fail to update your insurance policy to reflect these new circumstances.
Solution: Contact your insurance broker whenever a change occurs that affects your insurance needs – do not wait until your policy is up for renewal.
Mistake: Even if you do not have a major lifestyle change, failing to review your insurance policies regularly can lead to coverage gaps as your circumstances change.
Solution: Schedule regular policy reviews with your insurance broker to ensure your coverage aligns with your current needs, reducing the risk of being over or under-insured.
Mistake: Some people and businesses purchase policies without fully understanding the fine print.
Solution: Take the time to read and comprehend your policy details. If you're unsure about any aspect, don't hesitate to ask your broker for clarification.
Mistake: When you purchase an insurance policy, it is important to disclose all relevant information, such as your driving record or claims history. If you do not disclose all relevant information, your policy may be void.
Solution: Be honest and upfront with your insurance agent when you purchase a policy. Always complete all forms in a truthful manner.
Mistake: Failing to bundle multiple policies under a single insurer can cost you more in premiums.
Solution: Bundle policies, such as home and auto or various business coverage, to enjoy discounts and streamline your insurance management.
Mistake: Individuals and businesses sometimes underestimate the importance of liability coverage. Buying only the minimum amount of liability, says the iii, means you are likely to pay more out-of-pocket later. And if you are sued, those costs can jeopardize your financial well-being.
Solution: Liability insurance is your safeguard against legal claims. Opt for adequate coverage to protect your assets from potential lawsuits.
Mistake: Filing too many claims can raise your insurance rates. It is important to only file claims for significant losses.
Solution: Consider your deductible and coverage before filing a claim. If the cost of the repair is near or just your deductible, it may be better to pay out of pocket.
Mistake: Failing to insure high-value assets like art, jewelry, or equipment can be a costly oversight.
Solution: Ensure you have specialized coverage for these assets, as standard policies may not provide adequate protection.
Mistake: Some homeowners make the mistake of dropping flood insurance if they are not required to purchase it, but FEMA says that even if you live outside a high-risk flood zone, it’s a wise decision to buy flood insurance as more than 25 percent of flood claims nationwide occur outside these high-risk areas.
Solution: Check with the National Flood Insurance Program on your options for protecting your home from flooding risks.
Mistake: Businesses often neglect business interruption insurance, leaving them vulnerable in the face of unexpected disruptions.
Solution: Ensure your business policy includes business interruption coverage. This helps you recover lost income and maintain your operations during unforeseen events.
Mistake: Just because you are not a homeowner, it doesn’t mean you do not need coverage for your possessions and living expenses in the case of a disaster. Many renters do not seek coverage.
Solution: Talk with your insurance broker about affordable renters coverage that can keep you and your possessions protected.
Mistake: Businesses often overlook cybersecurity insurance, thinking it doesn't apply to them.
Solution: With the rising threat of cyberattacks, invest in cybersecurity insurance to protect your business from data breaches, ransomware, and associated liabilities.
Mistake: A risk management plan can help you to identify and mitigate your business risks. This can help you to reduce your insurance costs and protect your business from financial losses.
Solution: Work with your insurance broker to develop a risk management plan for your business. This plan should include a list of your business risks and the steps that you are taking to mitigate them.
Mistake: Many individuals underestimate the importance of life insurance, leaving their families financially vulnerable in the event of their passing.
Solution: Prioritize life insurance to provide for your loved ones when you're no longer there. It's a crucial component of financial planning.
Mistake: Attempting to navigate the complex insurance landscape without professional guidance can lead to costly errors.
Solution: Partner with an experienced insurance broker like Dean & Draper. Our expertise can help you find the right coverage, save money, and avoid common pitfalls.
Remember, that by avoiding these common insurance mistakes you can save money in several ways:
At Dean & Draper, we're dedicated to helping individuals and businesses in Houston and beyond make informed insurance decisions. Contact us today to discuss your insurance needs and secure your future.
The recommendation(s), advice, and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential, or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property, or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking, or responsibility to you. The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.