6 Mistakes to Avoid When Buying Insurance

Insurance protection helps to manage the risks that most people encounter during their adult lives. Those risks might endanger, damage, or destroy your personal property. They might cause you or someone else to suffer a serious injury.

The potential for property damage or injury is why various property and casualty insurance coverage exists. An injury that arises from using some type of property could segue into the need for life and health insurance. That property might be a car, a house, or maybe a commercial building in which you conduct some sort of business.

Wellman Shew has been a California insurance specialist since 1982 and the owner of Shew & Company Insurance Services in Fresno since 2005. He is one of California’s leading insurance experts and helps to advise clients regarding smart insurance decisions. Shew says the following are six commonly made mistakes that people like you often make when buying insurance.

Insuring a Property for Market Value Instead of Replacement Cost

You might own a home, vehicle, or another reasonably valuable property you want to insure. Your options for insurance coverage often include the option of insuring it at market value or for the replacement cost.

It costs less to insure your home, car, or another valuable property based on its market value than it does for replacement cost. Unfortunately, the market value of your car almost certainly will drop quickly. A downturn in the local housing market might cause your home to lose value.

If your insured property suffers significant damage or is a total loss, an insurance payout based on market value might be surprisingly low. A payout based on the replacement cost would enable you to replace your insured property – even if its value has gone up.

Agreeing to the Wrong Deductible

Deductibles can lead to more money coming out of your pocket if you have to file a claim. Health insurance is highly dependent upon significantly large annual deductibles that might require you to pay thousands of dollars before your insurance starts paying out.

”Wellman Shew says you should always pay close attention to any applicable deductible amounts and how they might affect your coverage. That is true for any insurance coverage, including auto and homeowners insurance policies.”

Buying Too Many Riders

When buying most insurance plans, you can modify the coverage with one or more insurance riders. A rider is an additional agreement that a policyholder might need to protect against a special risk. A homeowner whose house is within a designated flood plain might opt for a rider that covers external flooding.

Riders often are beneficial, but agreeing to too many will significantly increase your insurance premium. Some riders also are virtually useless and only increase your costs. Savvy policyholders pay close attention to any riders and only pay for those that cover practical needs.  

Skipping Flood Insurance

Flood insurance is very important for virtually any property owner and can protect against external and internal flooding. Most homeowners insurance policies offer some protection against internal flooding that might happen due to a malfunction or even leaving a faucet running.

Unfortunately, many homeowners neglect to buy flood insurance that covers external flooding. You need flood insurance to protect your home when the flood waters come through the doorway. Neglecting to buy flood insurance might make it impossible to fix or replace a flood-ravaged home.

Undervaluing Your Belongings

Homeowners’ and renters’ insurance policies often include nominal insurance coverage for your belongings. If your items are stolen, lost in a fire, or damaged or destroyed by a covered peril, your insurance protection might be minimal and mostly not cover your losses.

When you own costly electronics, valuable art, antiques, or other valuable items, Wellman Shew says you need to protect them for replacement cost. You should inventory your valuables, retain receipts whenever possible, and take photos of them. Doing so will help you to file claims that truly cover your losses and obtain the replacement cost from your insurer.

Ignoring the Benefits of Term Life Protection

Whole life insurance is excellent when you want to leave a financial legacy for your family. When short-term financial obligations arise, you might want to protect them with additional life insurance. Term life is the best way to do that.

You might have kids in college, a mortgage, or another financial obligation that will last a short time. A term life plan can give you very affordable protection to guard against a fatality that otherwise might cause those obligations to go unpaid.

Wellman Shew advises clients to research insurance plans and providers and learn as much as possible before buying a policy. Avoiding common mistakes will help you get the best insurance value and protection.

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