Buying insurance is about transferring risk you can’t afford to a company that can. The trouble starts when policies are chosen fast or on price alone. Avoid these five pitfalls.
1) Buying on Price, Not Protection
The cheapest quote often strips out benefits, lowers limits, or adds exclusions that matter when you claim.
-
Fix: Decide your required coverage first (limits, riders, service expectations), then compare price among policies that meet that bar.
2) Underinsuring Key Risks
People guess limits or choose minimums to save money—until a loss exceeds them.
-
Examples:
-
Auto: liability limits too low to cover medical/legal costs.
-
Home: dwelling coverage below rebuild value; no ordinance/law coverage.
-
Health: plans with very low premiums but very high out-of-pocket max.
-
-
Fix: Anchor limits to replacement or worst-case costs, not market value or loan balance.
3) Ignoring Exclusions, Waiting Periods, and Sub-limits
Claims are denied most often because a risk was excluded or capped.
-
Examples: flood/earthquake excluded from standard home; jewelry, electronics, or business property at home limited to small sub-limits; pre-existing conditions or maternity with waiting periods.
-
Fix: Read the “exclusions” and “limitations” pages; add riders (e.g., scheduled personal property, flood policy) where needed.
4) Inaccurate or Incomplete Disclosures
Rushing the application—forgetting prior claims, tickets, renovations, or health information—can void coverage.
-
Fix: Over-disclose. If you’re unsure, tell the broker/insurer in writing. Keep proof of disclosures.
5) Set-and-Forget Policies
Life changes (new car, remodel, dependents, remote work) but policies don’t—leading to gaps or overpaying.
-
Fix: Review annually and after big life events. Update beneficiaries, add/remove drivers, adjust mileage, and re-shop.
Quick checklist before you buy
-
What losses am I trying to protect against?
-
Do the limits match worst-case costs?
-
Any exclusions/waiting periods that affect me?
-
Are riders needed (flood, business equipment, high-value items)?
-
Have I disclosed everything?
-
Do I understand deductibles, copays, and out-of-pocket maximums?
This article is general guidance, not a substitute for policy documents or professional advice. Always read your specific contract.
