How to determine if you're smartly insured

How to determine insurance needsWhen consumers buy insurance, they are guided by a "well, you never know philosophy." That, according to experts, is a huge mistake.

Saving money can be as easy as making a phone call. "The number one way people waste money is simply not asking for all the credits that they could," says Bill Wilson, associate vice president of education and research for the Independent Insurance Agents & Brokers of America.

For instance, most insurance companies offer discounts for customers who buy more than one type of coverage. There are also deals for good drivers and for teen drivers with good grades. People should periodically review their coverage to make sure they are getting the most value for their money. Here are a few of the most common mistakes.

Has your driving routine changed because of a job loss? Notify your insurance agent immediately if you are putting less mileage on your car and your rates will be lowered. Also, watch deductibles, particularly if your vehicle is older, otherwise someone may pay as much to insure their vehicle as it is worth.

A driver willing to raise their deductible from $250 to $1,000 can save as much as 40% on their policies. Don't buy the bare minimum of coverage unless that is all you can afford because accident costs can quickly add up. (Check for a list of state requirements). The Insurance Information Institute (III) urges drivers to consider dropping collision and/or comprehensive coverages on older cars. "If your car is worth less than 10 times the premium, purchasing the coverage may not be cost effective," the trade group says. recommends that the amount of coverage is higher than your assets or else attorneys are likely to come after your home or other assets to damages caused by an accident where you are at fault.

About 60% of homes are under-insured, which can be disastrous if disaster strikes, Wilson said. There are ways to save money, however, Homeowners often pay too much for coverage by insuring the value of the land that lies under their house, which is not at risk from natural and man-made disasters covered in your policy, according to the Insurance Information Institute.

Experts also urge that people insure their home for enough to rebuild it as it was before it was felled by a disaster. Oftentimes people confuse their home's sale price with the costs of building a replacement. They are not the same and it's a good idea for people to get additional coverage as a hedge against these costs. People often mistakenly reduce their coverage if their home's value plunges. As with auto policies, it pays to take higher deductibles to save money.

About the only thing that experts agree on is that many people lack life insurance who should have it and many people who have coverage don't have enough of it. New Hampshire agency owner Tom Minkler says he is "constantly amazed" by the customers he encounters without adequate coverage.

Anyone wondering how much coverage they need might want to check out Bankrate's calculator which factors everything from burial costs to paying for college tuition to paying down a mortgage. Though there are estimates online about rules of thumb for calculating how much coverage, they should be avoided because they tend to result in people getting too little coverage.
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