4. Not knowing your policy.
Consumers' biggest mistake is not knowing what's in the fine print of their policies, says Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University. They don't know what their deductibles are and don't realize what's not covered until disaster strikes.
|Common insurance blunders|
She says consumers need to talk to their agents to find out what's not covered and do an evaluation each year.
5. Not buying enough of certain important insurance products.
Don't skimp on health insurance no matter how robust you feel today. "I don't think anybody today should be without health insurance," says Praeger. "Finding a way to at least have catastrophic health insurance, I think, is really important so you don't just go into such medical debt that you never can dig your way out."
Also consider getting life insurance if you have dependents. It can help pay the bills after a working parent dies unexpectedly. Praeger recommends buying it when you're young and healthy -- it's much cheaper and easier to obtain when you don't have a chronic disease.
Unless you have major assets to tap, think about getting long-term disability insurance. "It's the single most important coverage for anyone who works," says Okumura. "Disability income is more important than life, even though it gets more press," he says, adding that people are much more likely to become disabled than they are to die early. If you become disabled and can't work, long-term disability insurance can help keep you and your family financially solvent.
He suggests maintaining an emergency fund of three to six months' worth of living expenses to take care of short-term disabilities. Then you can save your money to buy the long-term policy with your employer, if available.
Okumura also advocates getting long-term care insurance as soon as it becomes feasible to do so. Long-term care insurance can help pay for the cost of expenses associated with chronic illnesses, as well as nursing home care and in-home caregivers. The younger you are, the easier it is to qualify, he explains. "People think they don't have to deal with it until they're 50," he says, arguing that people can develop multiple sclerosis (MS) at 30 or 40 years of age. "You're uninsurable at that point."