5 Insurance Mistakes to Avoid

Here are the five biggest auto, home, flood and renters insurance mistakes consumers can make, with suggestions to avert those pitfalls while still saving money:

1. Insuring a home for its real estate value rather than for the cost of rebuilding.

As mentioned above, when real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace you belongings. A better way to save: Raise your deductible. An increase from $500 to $1000 or $2500 could save you up to 20% depending on the carrier.

2. Selecting an insurance company by price alone.

It is important to choose a company with competitive prices, but also one that is financially sound and provides good customer service. A better way to save: Check the financial health of a company with independent rating agencies such as AM Best, Demotech and KBRA. You should select an insurance company that will respond to your needs and handle claims fairly and efficiently. A good local insurance agent will also help navigate the claims process.

3. Dropping flood insurance.

Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP) as well as from some private insurance companies. Many homeowners are unaware they are at risk for flooding, but in fact 25 percent of all flood losses occur in low risk areas.

A better way to save: Check with your local agent on the NFIP’s rate and compare to private flood rate. If you are in a flood zone look at mitigation efforts that can reduce your risk of flood damage such as break away walls or flood vents. Additional information on flood insurance can be found at www.FloodSmart.gov.

4. Only purchasing the legally required amount of liability for your car.

In today’s litigious society, buying only the minimum amount of liability means you are likely to pay more out-of-pocket if you are sued – and those costs may be steep. A better way to save: Consider dropping collision and or comprehensive coverage on older cars worth less than $2000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident.

5. Neglecting to buy renters insurance.

A renters insurance policy covers your possessions and additional living expenses if you have to move out due to an insured disaster, such as a fire or hurricane. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.

Review your policies with your insurance agent once a year or every other year at the longest. These reviews can lessen your risk of being uninsured and keep surprises at a minimum.