Insurance World

Just because you have insurance doesn’t mean it will be enough to protect your hard-earned assets should the inevitable happen. There are countless situations - like a home fire, a car wreck with injuries, or someone getting hurt on your property (to name a few) - where your level of home or auto insurance could make or break your financial future.

Here are five commonly made insurance mistakes and how to avoid them, according to Charles Valinotti, General Casualty Insurance Companies’ assistant vice president, and John Blodnick, Unigard Insurance Group’s vice president.

1. Buying the cheapest policy out there. You might save a buck by getting the minimum amount of insurance you legally can. But if the cost of an accident ends up being more than your policy covers, you’re still responsible for paying the rest. Other parties could go after you and your assets.

2. Forgetting to pay your bills. There are plenty of understandable reasons why you might not pay your bill on time. But be warned that if you don’t pay your bill, your insurance company isn’t obligated to cover you - period. To avoid this, set up automatic payments through your bank or insurer or escrow for your home insurance. Otherwise, move your insurance bill to the top of the stack.

3. Assuming your stuff is covered. Policies limit how much coverage they provide for certain higher value items. Have a diamond wedding ring? Antique silverware? Customized wheels on your truck? Nice stereo system? Expensive guitar? These could fall outside the realm of a typical home or auto policy’s coverage. It’s easy to rectify this problem by “scheduling” or adding extra coverage with an endorsement, which gives you higher limits on certain items.

4. Not bothering with an umbrella liability policy. Umbrellas are only for rich people, right? “No, umbrellas are for every Tom, Dick and Harry. Think about your annual combined household income. Isn’t that worth protecting?” Valinotti said.

What if someone got hurt during your child’s next birthday party or your upcoming backyard barbecue? You can purchase an umbrella for as little as $100 for $1 million of extra coverage, depending on the policy and which area of the country you live in. “It’s a risk not to have an umbrella, like playing the lottery with your financial future,” Valinotti said.

5. Keeping your agent in the dark. If you’ve recently built an addition on your home or made a big purchase (see number three), talk to your agent. Without extra coverage, you could be underinsured. Or if you get your bill and decide you want less coverage, talk to your agent. Policy changes may or may not be a good idea, but it’s your insurance agent’s job to advise you.

“Today, people often feel that an agent is not necessary,” Blodnick said. “However, considering the complexity of the products you are buying in an ever-more complex world, the expertise of a professional agent can be extremely important.”

For example, at a glance you may think, “I don’t need ‘other than collision’ coverage on my car.” But your agent would tell you that’s what covers you if your vehicle is stolen, catches fire, is damaged by hail or wind (such as a tornado), or if you hit a deer.

Your agent can also suggest ways to save money on insurance without risking your financial security – such as taking a driver safety class, getting a home security system, taking down the trampoline your kids never use, increasing your deductible, or taking advantage of multi-policy or good student discounts.

Contact your local independent insurance agent for a review of your personal insurance policies. - ARA

The word shopping brings a feeling of immediate excitement to most people. But if you combine the word shopping with car insurance, as in “shopping for car insurance”, it produces the opposite effect. The thought of shopping for auto insurance makes the eyes glaze over and the heart rate drop to the pace of a slumbering couch potato.

Couch potato? Indeed. Doug Heller, a consumer advocate at the Foundation for Consumer Rights and a recognized insurance issues specialist, told us that too often “people purchase insurance by calling the number on the screen.”

But wait, this is important stuff! You want to be adequately covered if you get in an accident. And you certainly don’t want to pay more for car insurance than you should. Maybe waiting for a solution to be beamed into your living room is not the best idea.

How can you stay awake while navigating through this murky subject? Just remember: There is money to be saved. How much? Hundreds, even thousands, per year. For example, one of the authors typed all of his insurance information into a comparative insurance service. The quotes (for very basic coverage on two old cars) ranged from $1,006 to $1,807 — a difference of $801 a year. If you’re currently dumping thousands into your insurance company’s coffers because of a couple of tickets, an accident or a questionable credit rating, shopping your policy against others may be well worth the effort.

Look at it this way — you can convert the money you save into the purchase of something you’ve lusted after for a long time. Hold that goal in your mind. Now, let’s begin.

Before you can shop for something, you have to decide what you need. The first step in finding the right auto insurance for you is to figure out the amount of coverage you need. This varies from country to country. So take a moment to find out what coverage is required where you live. Make a list of the different types of coverage and then return for the next step.

Now that you know what is required, you can decide what — if anything — you need in addition to that. Some people are quite cautious. They base their lives on worst-case scenarios. Insurance companies love these people. That’s because insurance companies know what your chances are of being killed or maimed, and how likely it is for your car to be damaged or stolen. The information the insurance company has collected over previous decades is crunched into “actuarial tables” that give insurance adjustors a quick look at the probability of just about any occurrence.

It is important to keep in mind that the basis of insurance is a difference of opinion between you (the insured) and them (the insurance company). You believe you will, at some point, probably get in an auto accident. The car insurance company believes you probably won’t. And the insurance company is willing to take your money to prove you wrong.

So how much auto insurance should you buy beyond your state’s minimums?

“Look at your personal financial situation,” Dennis Howard, director of the Insurance Consumer Advocate Network and former insurance adjuster. “If you have assets to protect — and that is all insurance is doing — get enough liability coverage.”

Another issue Howard mentioned is that the limits of any uninsured and/or underinsured motorist coverage that you purchase cannot exceed the limits of your liability coverage. Such coverage, he said, can be valuable, as it will cover lost income if you’re out of work for several months after being injured in a major accident.

Your driving habits may also be a consideration. If your past is filled with crumpled fenders, if you have a lead foot or a long commute on a treacherous winding road, then you should get more comprehensive coverage.

“Consumers should also be aware that they don’t have to buy the package [of collision and comprehensive coverage],” Howard said. “If your vehicle is older, if you have a good driving record and if there is a low likelihood that it would be totaled in an accident, but a high likelihood of it being stolen, you could buy comprehensive but not collision.” Seems like good advice for all of the 1989 Toyota Camry owners reading this article — this has been the most stolen car in the nation for several years (it’s often stolen for parts). But we would expect that most of them on the road have well over 100,000 miles.

At this time, a rather sobering point needs to be interjected. Just having car insurance doesn’t protect you from absolutely anything bad that might happen. First, the insurance company needs to back up the claims that they make in the fine details of the contract. TV ads show folksy adjustors at the scenes of natural disasters passing out claims checks like coupons for cocktail wieners at a supermarket. But, in case you haven’t noticed, real life is a bit different from TV ads. If you have an accident, your car insurance company will take a close look at your claim before mailing you a check. And the check may be written for an amount much smaller than you had hoped. For this reason, you should be intimately familiar with the terms of your policy and call the company with any questions you might have.

Now that you have made several practical and philosophical decisions, it’s time to start shopping. Begin by setting aside about an hour for this task. Bring all your records — your current insurance policy, your driver license number and your vehicle registration. Drink plenty of coffee. Have a phone at your elbow. And, of course, power up your computer.

Begin with the online services. On many sites you can type in your information and get a list of comparative quotes. The form takes about 15 minutes to complete. If this bores you, just remind yourself that you are saving money and you can use that money to buy something nice for yourself. If the entire shopping process takes you two hours to complete, and you save $800, you’re effectively earning $400 an hour. While you’re researching companies, make notes in a separate computer file or on a piece of paper divided into categories. This will keep you from duplicating your efforts.