Saving money is always a necessity, no matter how much you earn. Shopping around when you’re looking for insurance can help you save money and get the coverage you need to help you achieve financial freedom. Unfortunately, many people make mistakes when shopping for insurance that can cost them money and time. Here are insurance mistakes to avoid in 2023.
Insuring a Home-Based on Real Estate Value
Rather than insuring a home based on real estate value, you should ensure it is based on the cost of rebuilding. When real estate prices drop, homeowners think they can reduce the insurance they have on their homes. However, insurance should cover the cost of rebuilding your entire home, not how much you can sell it for. When you buy homeowner’s insurance, ensure you have enough to cover the cost of rebuilding your house if there’s a fire or natural disaster, no matter what the real estate market says your house is worth.
If you don’t insure your home based on the cost to rebuild, you might not have enough insurance to rebuild your home if something happens to it, which means paying out of pocket and using up your savings account to finish your home repairs.
Selection Based on Price
When shopping around for all types of insurance, including health insurance, renter’s insurance, car insurance, and even life insurance, you should be conscious of the price. However, you should choose to work with an insurance company that offers competitive pricing, not just the cheapest pricing.
The insurance company you choose should also provide you with good terms and excellent customer service. For example, you should always compare car insurance prices. However, don’t simply pick one just because it’s the lowest price. Look at the prices of all the other insurers. If you see one is significantly lower than the rest, then do your research before you sign an agreement. You might be missing valuable information and could get poor terms because you didn’t do the necessary research.
Dropping Flood Insurance
Even if you live in a dry climate, you should have flood insurance because you never know what could happen. Damage from flooding may not be covered in your homeowner’s or renters’ insurance policy. If you’re not sure whether or not it is covered, check your policy before you drop additional coverage. Unfortunately, many homeowners aren’t aware that they are at risk of flooding, but many floods occur yearly in lower-risk areas. Everything from rainfall, living near a stream, and even melting snow can cause floods that can damage the structural integrity of your house and result in mold.
Purchasing the Minimal Required Car Insurance
You must legally have car insurance to drive in the U.S. but many people make the mistake of getting the legally required amount of insurance, and nothing more. Buying the minimum amount means if you get into a serious accident, you’ll likely be paying out of pocket for medical care or costly car repairs, which can quickly put you into debt.
Neglecting Renters Insurance
Many renters believe that because they do not own their homes, they don’t need insurance. However, the same thing that can happen to an owned house can happen to a rented apartment. For example, a thief can break into a house or a rental and steal your belongings. Both types of insurance also provide you with liability protection if someone is injured in your home and files a lawsuit, so it’s always better to be safe than sorry when renting your home.
Forgoing Life Insurance
Many people drop their life insurance policies or never get them in the first place because they believe their loved ones will be just fine if they pass away. While this might be true for some, others rely on their spouses’ income to pay at least half of the bills. For example, if you make $50,000 per year before passing away, that’s $50,000 that your spouse will no longer have access to, which can leave them unable to pay the mortgage and other bills.
While life insurance might seem like an additional expense that’s not necessary, it’s protection for your family that you should always consider, especially if your spouse doesn’t work and you have children.
At the very least, a basic life insurance policy will help cover the costs of your funeral, which could put your family thousands of dollars in debt if they have to pay for it out of pocket.
Neglecting Health Insurance
Having health insurance is not required by law, and there’s no longer a fee associated with not purchasing a health plan. However, health insurance can pay for the cost of medical care when you need it most. For example, hospital stays can end up putting you in debt, even if your stay is just a few days. Emergency medical care is expensive, and if you don’t have health insurance, you could end up paying out of pocket for it.
You may also want to consider dental and vision insurance based on your oral and eye health. If you’ve always needed glasses or seem prone to cavities, insurance will offset the costs of seeing a doctor when you need them most. Of course, dental and vision insurance is not required by law, but it might be able to help you save money in the long run.
Many employers offer employer-sponsored health insurance plans, which allow you to purchase a quality health plan at a fraction of the cost. Your employer will pay for part of your insurance, and you’ll pay for the rest. Typically, it’s better to get health insurance through your employer than the health insurance marketplace because you have access to better plans for a lower monthly premium.
Avoiding Mistakes
If you’re young and have never had to buy insurance before, then you’re likely to make mistakes. By learning about common insurance mistakes, you can learn what to avoid and how to find the best insurance based on your needs.
