Sometimes we make mistakes because we don’t know and don’t ask. This is often the case with insurance, so here are three important general insurance mistakes to avoid:
Not carrying the right policy: Just because you can buy a certain type of policy doesn’t mean it’s the best fit for what you want to insure, even if it is cheaper. For example, standard auto insurance is cheaper than collector car insurance, so many people insure their valuable collector cars with standard auto insurance, just as they would any other car. In fact, collector cars should be insured on an agreed-value or stated-value basis. They present different risks than other cars, so a standard policy may be insufficient or not even cover a claim. Discuss what you want to insure and the kind of protection you want with your insurance agent.
Failing to read your policy: Insurance policies can be a bit long-winded, but read them to understand what protection you have – or don’t have. Failing to do this can be devastating. For example, a large number of homeowners whose homes were completely destroyed in Hurricane Katrina learned – after the storm – that homeowners insurance doesn’t cover flood damage.
Leaving coverage gaps: Learn exactly how your policy works. Take homeowners insurance, for example. There’s quite a gap between insuring your home at replacement cost versus its market or appraised values. If you know how the policy works, you won’t be left with a gap, nor will you pay for more insurance than you need.