When you are looking to save money on insurance, you may be tempted to reduce your coverage; but focusing on the numbers instead of your goals could leave you dangerously underinsured. This could lead to much bigger bills in the event of a disaster.
Here are three mistakes to avoid when it comes to insurance coverage.
Insuring a home for its value instead of the cost of rebuilding
Real estate prices fluctuate, and when they do, some people think they can reduce the amount of homeowners’ insurance they maintain. But that ignores a fundamental principle of homeowners’ insurance: it is designed to cover the cost of rebuilding your home, not the sale price of your home. As a result, your homeowners’ policy should be robust enough to ensure you can completely rebuild your home and replace your belongings. If you need to save money on your homeowners’ policy, consider raising your deductible instead.
Purchasing only the legally required amount of automotive liability insurance
Different states require different amounts of automotive liability insurance coverage. But the requirements are minimums. Buying only the minimum could mean you pay more out of pocket later, especially if you are sued, in which case the costs could be significant enough to jeopardize your financial well-being. Consumer groups generally recommend at least $100,000 in bodily injury protection per person and $300,000 per accident.
If you need to save money on your automotive policy, consider dropping collision and/or comprehensive coverage on older cars.
Choosing an insurance company by price alone
We all want to choose an insurance policy with competitive prices. But we also want to be paid in an efficient manner when a claim is filed. So we recommend you make sure that the carrier you choose is on stable financial footing and provides good customer service.