7 common insurance mistakes

Insurance is the product you buy in case the unthinkable happens. Unfortunately, by the time you need it, it's too late to make sure you have the right type and amount of insurance coverage. Make sure you don't make the following mistakes while buying financial protection against disaster.

Common insurance blunders
Make any one of these mistakes and you could wind up paying too much for insurance or leave yourself severely underinsured.
7 common insurance mistakes
1.Not shopping around for insurance
2.Only comparing rates
3.Not comparing agents
4.Not knowing your policy
5.Not buying certain types of insurance
6.Buying unnecessary insurance policies
7.Not updating your coverage

1. Not shopping around for insurance.
The most common mistake is that people don't shop around for insurance, says J. Robert Hunter, director of insurance at the Consumer Federation of America. "When I talk to insurance consumers, there's this funny combination of fear and boredom," he says. They wind up going to one agent and letting this person handle their insurance needs.

Hunter says if they would just read the insurance buyers guides offered by their state insurance departments and then call around to a few different companies, it could make a huge difference in the price they pay for insurance.

2. Only comparing rates.
When you're shopping around, it's best to look not only at prices but at companies' pay claims reputations, says Kirk Okumura, author and editor of the Life Underwriter Training Council Program at the American College, where his responsibilities include writing study material and textbooks for insurance courses.

You can check out insurance companies by looking at how they rank with third-party insurance rating companies, such as A.M. Best, Fitch Ratings, and Standard & Poor's.

Also examine a company's complaint ratio. State insurance departments sometime publish this information and the Web site of the National Association of Insurance Commissioners publishes these numbers.


3. Not comparing agents.
Not all agents are created equal. First, make sure an agent is properly licensed, says Kansas Insurance Commissioner
Sandy Praeger. Check with your state department of insurance.

Then make sure to get referrals and ask each agent some questions. "Ask them to explain the policy," Okumura says. "Ask what value they're going to bring to the table. How will they help you?"

-- Posted: Aug. 20, 2007

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