When you’re shopping for insurance as a consumer, it can feel like an overwhelming process. There are so many types of policies to choose from, and each company seems to offer its own unique take on what coverage you need. While it may seem like there’s only so much variance when it comes to insurance, the differences between insurers can be striking. One company may focus on eco-friendly products while another emphasizes customer service and reasonable premiums. Finding the right carrier for your needs can make all the difference when purchasing insurance. With so much variation between companies, it’s easy to make mistakes when buying insurance. Even for someone with years of experience in the industry, individuals often overlook important details or fail to ask critical questions about policy specifics that could come back to haunt them later if they aren’t fully informed before signing on the dotted line. Here are some common pitfalls that people stumble into when buying insurance:
The importance of being informed when buying insurance.
Insurance is a contract between you and an insurance company. If you don’t understand your contract, you have no way of knowing whether or not you’re getting a fair deal. If your insurer is dishonest or fails to pay as promised, you’ll have no recourse. This can lead to a lot of frustration and stress as you try to untangle the mess and find a new insurance carrier on your own. Now, this doesn’t mean that you need to know everything about the insurance industry. If you are looking at a term life insurance policy, you don’t need to know how your coverage compares to other types of policies. You just need to know how much coverage you need and that it’s affordable. However, you do need to understand the basics of what you are buying and be able to identify red flags or simple mistakes that could affect your coverage.
Choosing the wrong type of policy.
Insurance policies come in all shapes and sizes. Some are designed to protect your assets against loss while others are meant to replace your income if you are injured and can’t work. There are also a number of policies that are meant to cover both types of losses, depending on the terms of the policy. For example, a life insurance policy is designed to cover the financial loss suffered by your loved ones if you die. This type of coverage is meant to be a one-time payment that your beneficiaries can use to cover your unpaid debts and other financial expenses. It’s not meant to serve as a long-term disability policy that helps you make ends meet. If you choose the wrong type of policy, you may not have the coverage you need when you really need it.
Not understanding your coverage limits.
Insurance is meant to protect you against financial losses that you can’t afford to pay on your own. If you are injured, you might be unable to work and earn the money you need to pay your bills. Your house or car may be damaged and require repairs that you don’t have the cash for. Your business may experience a setback that cuts into your profit margins and impacts your ability to pay the bills. Insurance can help offset the cost of these and other unforeseen expenses, but only if you have the right coverage limits in place. If you don’t understand the coverage limits of your policies, you may be left with nothing to fall back on when disaster strikes. This can leave you and your loved ones in a very precarious position. You may also end up losing a lot of money in the long run because you’re paying for unnecessary coverage or not purchasing enough to truly protect yourself.
Omitting key details during the application process.
Insurance companies look at a variety of factors when calculating your premium and determining the type of coverage you qualify for. They want to know how likely you are to file a claim, the average cost of filing a claim, your age and gender, where you live, and several other factors. Some of these factors are controllable and others are not, but whatever information you can provide can help you secure a better policy at a lower price. If you fail to provide key details about your life during the application process, you could hurt your chances of qualifying for lower rates and appropriate coverage. If a company discovers a crucial fact about your life that you failed to mention during the application process, they may void your policy or lower your coverage limits. This could leave you with reduced coverage, a higher premium, or leave you without the coverage you need when you need it most.
Falling for high-pressure sales tactics.
Insurance salespeople are trained professionals that know exactly what to say and do to get you to sign on the dotted line. If you don’t know how to spot common sales tactics and techniques, you could easily fall victim to oversights or omissions in the terms of your policy that could come back to haunt you months or even years down the road. If you are buying coverage from a salesperson in person, keep in mind that you can walk away at any time. You can also shop around and compare quotes from other companies to make sure you’re getting the best deal possible. If you are buying policies online, be sure to check for regulatory licenses and other signs that the company is legitimate.
Forgetting to check the quality of your insurer.
The best policy in the world won’t do you much good if your insurer goes out of business before paying off your claim. Companies come and go all the time. Some insurers have been in business for decades while others have collapsed after just a year or two in the industry. If you’re buying coverage from a new insurer, be sure to check its financial stability and track record. Look for signs that it is financially sound and has the resources to stay in business for the long haul. You may want to consider waiting until your insurer has been in business for a few years before purchasing a policy. You may also want to consider diversifying your policy portfolio by spreading your coverage between two or three insurers. This way, if one company goes out of business, you still have some coverage left over from your other policies.
