FIVE INSURANCE FAULTS TO AVOID… (AND STILL SAVE CASH)

DODGE THOSE COMMON FAULTS AND YOU’RE ON YOUR WISHES AND BUDGET

Avoid these pitfalls when buying auto, home, flood and renters insurance.

Saving money feels good. And shopping around when you’re looking for insurance coverage is a great way to do it. However, simply reducing your coverage or dropping important coverage altogether is like diet without exercise focused only on numbers, not on results. Don’t risk ending up dangerously under insured and on the hook for much bigger bills in the event of a disaster.

Following are the five most common auto, home, flood and renter’s insurance mistakes people make, along with suggestions to avert those pitfalls while still saving money (we call them, “better ways to save”):

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

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 your belongings no matter what the real estate market is doing.

A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25 percent on your premium payments.

2. Selecting an insurance company by price alone.

It is important to choose a company with competitive prices. But be sure the insurer you choose is financially sound and provides good customer service.

A better way to save: Check the financial health of a company with independent rating agencies (some well-known ones: A.M. Best, Moody's), and ask friends and family members about their experiences with insurers. Select an insurance company that will respond to your needs and handle claims fairly and efficiently.

3. Dropping flood insurance.

Damage from flooding is not covered under standard homeowners and renter’s insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. You may not be aware you’re at risk for flooding, but keep in mind that 25 percent of all flood losses occur in low risk areas. Furthermore, yearly weather patterns spring runoff from melting winter snows, for example can cause flooding.

A better way to truly save: Before buying a home, check with the NFIP to find out whether a house is located in a flood zone; if so, you may want to consider a less dangerous area. If you're already surviving in a designated flood zone, look at mitigation initiatives that could lessen your risk of flood damage and consider purchasing flood insurance. Additional home elevators flood.

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

The minimal is merely that the least you will get out with by law. So, getting only the minimum amount of liability indicates you will likely spend more out-of-pocket later. And if you're sued, these fees can jeopardise your financial well-being.

A better way to truly save: Consider falling collision and/or extensive insurance on older vehicles worth significantly less than $1,000. The insurance industry and customer communities typically suggest a minimum of $100,000 of bodily injury security per individual and $300,000 per accident.

5. Neglecting to buy renters insurance.

A renter’s insurance policy covers your possessions and additional living expenses if you've to re-locate as a result of a covered disaster, such as a fireplace or hurricane. Similarly, crucial, it provides responsibility safety in case someone is wounded in your house and chooses to sue.

An improved way to save: Consider multi-policy discounts. Buying a few plans with the exact same insurer, such as renters, vehicle, and life will generally offer savings.