Insurance is supposed to provide financial protection and security, but people make a variety of mistakes that can undermine their coverage, leaving them exposed to financial loss or ruin.
Mistake #1 – Buying Based Solely on Price
First off, know the type of coverage you need so you don’t base your insurance decisions solely on price. Using price as the sole determinant when shopping for an insurance policy is by far the biggest and most common mistake people make. When someone says the only thing, they care about is the price, that’s saying I don’t care about coverage.
Sometimes companies are within a few dollars of each other, but the coverages are substantially different. After the loss is not the time to find out that for an extra few bucks I could have this claim covered. When all you are thinking about is the cheapest thing, you will over look things like water backup, slab coverage, identity theft, or even proper limits.
Mistake #2 – Having Coverage with Several Carriers
When you are shopping for the best deal you might end up with one carriers for automobile insurance, another for your home insurance coverage, and another for your business. First off, many insurance carriers offer discounts if people buy all of their coverage with them. This is true even with business insurance.
This can also prevent future problems. If you have an accident and multiple companies are involved it is likely they will try to push responsibility off on each other. You’ll get insurance companies fighting against each other instead of fighting on your behalf.
Mistake #3 – Not Working with an Independent Agent
The simple fact is that agents who represent multiple carriers can find the right coverage and the best price. As an independent agent we represent a large number of different carriers with many different appetites which mean you have a greater range of options.
We also provide more flexibility. If you don’t like what the carrier is doing or saying, we will find you a new one. This isn’t possible with agents who represent only one carrier.
Mistake #4 – Working with Multiple Agents
This is one of the worst things you can do. You might think your saving money when you have your property with one agent and your auto with another, and liability with a third, but if they don’t realize all these other exposures exist they may not provide the right coverage or worse omit coverage completely because they just didn’t know. There can be subtle coverages people miss that can have a dramatic effect on their claim settlements.
Mistake #5 – Insuring for Purchase Cost, Market Value, Apprised Value, or some other value as opposed to the Actual Cost to Rebuild or Replace
I talk to people every week about the importance of insurance to value, especially when they are purchasing property that is 30 years old or more as I explain that they want to be able to rebuild if something catastrophic happens. Even when the fire department is across the street.
It’s especially hard to understand when you are purchasing property that has just been built. You know what the exact cost to rebuild was, but do you know it is cost more to rebuild then it does to start from the ground up? Likewise, if your rebuilding cost was based on work done in 2017 or later it doesn’t take into account that catastrophic events over the past couple of years have (and continue) to drive up building materials and labor costs.
Mistake #6 – No Local Ordinance Protection
Imagine you have a 50-year-old piece property that was partially destroyed by a fire. Your set to rebuild the damaged half, but city code comes in and says because of the extent of damage and it’s age the property is not up to code and the entire property must be brought up to code. Now you have to rebuild the entire structure to comply with the local ordinance.
In this situation the insurance company will likely decline to pay for the undamaged half. You need Ordinance and Law coverage to protect you for losses that arise out of the operation of building laws.
Mistake #7 – Failure to Be Clear on Exclusions and Definitions
When people buy insurance they often do not read through the entire policy, in fact many don’t even open the policy until a claim happens and then it is to late. I admit that many sections are complicated and are written in legalize, but two areas that should be discussed are exclusions and definitions.
Exclusions can be incredibility important when it comes to liability. Many liability policies excluded liability associated with aircraft industry.
Say you just happen to work at a small private airport, but your work is not related to the aircraft industry. This could trigger a claim denial. Or you are in the service industry and not thinking make a service call at the local airport. It’s not like you are out on the runway or even in a plane in fact you are in the terminal – very likely not covered.
Definitions are also critical for business owners. Traditionally, in commercial insurance, personal property is defined as property owned by the insured. This can cause problems, if you frequently handle property belonging to others. You want the definition of business property to be the property of you, the insured, and any other property in your possession for which you are legally liable. Or that the proper coverage has been obtained protecting you and your client.