According to Lend EDU, 54% of US adults carry life insurance, yet 33% don’t understand how it works.
According to another Bend Financial report, “half of Americans are hopelessly confused by health insurance — so much so that the average American has a D-grade level of knowledge on their policies.”
Granted, consumer insurance isn’t the most exciting topic to discuss at the barbershop or local pub, but when there’s huge money on the line – as is the case with most household insurance – it pays to pay attention.
Technology and the insurance sector itself can contribute to closing the knowledge gap.
Insurance professionals are well-versed in the intricacies of insurance policies and the potential pitfalls that policyholders may encounter. Here are seven common insurance mistakes that insurance professionals tend to avoid:
1. Underinsuring
One of the biggest mistakes is failing to accurately assess the value of assets and adequately insure them. Underestimating the value of property or possessions can lead to insufficient coverage in the event of a loss.
2. Not Reviewing Policies Regularly
Insurance needs can change over time, so it’s essential to review policies periodically. Neglecting to review and update policies can result in coverage gaps or missed opportunities for savings.
3. Not Understanding Policy Exclusions
Policyholders should thoroughly read and understand their insurance policies, particularly the exclusions section. Failing to grasp what is and isn’t covered can lead to unpleasant surprises when filing a claim.
4. Choosing the Lowest Premium
Opting for the cheapest insurance policy without considering the coverage provided is a common mistake. Price is important, but it shouldn’t be the sole deciding factor. It’s crucial to strike a balance between affordability and adequate coverage.
5. Not Shopping Around for Quotes
Failing to compare insurance quotes from different providers can prevent policyholders from obtaining the best rates and coverage options available to them. It’s wise to explore multiple options before making a decision.
6. Overlooking Deductibles and Coverage Limits
Policyholders should pay attention to deductibles and coverage limits. A low deductible may lead to higher premiums, while a high deductible could result in significant out-of-pocket expenses during a claim. Understanding coverage limits ensures adequate protection for valuable assets.
7. Neglecting to Ask Questions
Insurance policies can be complex, and it’s important to clarify any doubts. Insurance professionals understand the importance of asking questions to gain a clear understanding of policy terms, conditions, and coverage details. Seeking clarification helps prevent misunderstandings down the line.
By avoiding these common insurance mistakes, policyholders can ensure they have appropriate coverage that meets their needs and protects them from potential financial risks. Consulting with an insurance professional can provide valuable guidance in navigating the insurance landscape and making informed decisions.
