The Insurance Information Institute recently highlighted the five biggest insurance mistakes to avoid.
Insuring a Home For Its Real Estate Value
Topping the list was insuring a home for its real estate value instead of its replacement costs (Replacement Cost vs Actual Cash Value).
“When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home,” the III said in a press release. “But insurance is designed to cover the cost of rebuilding, not the sales price of the home.”
They recommend that you obtain a homeowners insurance policy that provides enough coverage to completely rebuild your home and replace any belongings.
Selecting an Insurance Company by Price
The second biggest insurance mistake is picking an insurance company by price alone.
Sure low prices are great, but it’s also very important to pick a company that is financially sound (insurance company ratings) and provides good customer service (top auto insurers by customer satisfaction).
Dropping Flood Insurance
Remember, flood damage is not covered under a standard homeowners or renters insurance policy, so be sure you have flood insurance in place if you live in a flood risk area.
Note that roughly 25% of all flood losses occur in low risk areas.
Purchasing Bare Bones Car Insurance
Though minimum auto insurance can save you a lot of money on your premium, it can also put you at great risk of paying high out-of-pocket expenses for non-covered events.
The insurance industry generally recommends a minimum of $100,000 for bodily injury protection per person and $300,000 per accident, so don’t skimp.
Not Purchasing Renters Insurance
Rounding out the list is failure to purchase renters insurance. Just because you don’t own a home doesn’t mean you shouldn’t protect your belongings.
Renters insurance also provides liability protection if someone is injured in the home you rent and decides to sue.