National Survey Finds Many Consumers Are Making Costly Insurance Mistakes
ALEXANDRIA, Va., Dec. 19, 2013—A new national survey reveals consumers have an alarming lack of knowledge about their own insurance coverage. As the new year approaches, Trusted Choice® and the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) say consumers should resolve to get their insurance coverage in order.
The independent survey conducted for Trusted Choice® and the Big “I” found that more than one-third, an alarming 38% of respondents, said they have never conducted their own research prior to purchasing an insurance policy. Almost 40% of respondents said they were not confident or only somewhat confident that they have adequate and appropriate insurance coverage for their needs.
“It’s critical that consumers understand the basics of protecting their family, home and property,” says Robert Rusbuldt, Big “I” president and CEO. “This survey shows that many Americans may not even realize they are vulnerable to serious losses. A lot can happen in a year. The start of a new year is a perfect time to dust off your insurance policies and review them thoroughly.”
Since there are so many types of insurance available today, consumers should sit down with a reputable insurance professional to help sort through the confusion. The new survey also found that more than one-third of policyholders have not met with or even talked to their insurance agent within the last year.
“Keeping your agent updated on changes in your family or to your property is crucial to your financial security,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “A new baby, marriage, divorce, death, home renovation or a major purchase could significantly impact your insurance needs and costs.”
This broad lack of understanding can lead to serious and expensive insurance coverage mistakes. Trusted Choice® independent insurance agents identify the following as some of the most common errors they see.
Mistake 1: Not Knowing Your Limits.
Trusted Choice® agents report that too many customers don’t know the limits of their insurance coverage and don’t understand how inexpensive it can be to increase them. This is especially true regarding liability coverage.
“The limits of your policy dictate how much coverage you actually have,” explains Rusbuldt. “For example, an independent agent can increase the liability limits on a typical homeowners policy from $100,000 to $300,000 a year for as little as about $25 annually.” Not enough consumers have separate umbrella liability policies which can provide $1,000,000 of protection a year for as little as $130.
In fact, the new survey says only 29% of respondents considered coverage limits, or the amount of coverage, the most important criteria when selecting an insurance policy. Your coverage limits deserve a closer look.
Mistake 2: Disregarding Discounts.
A previous study by Trusted Choice® and the Big “I” showed that many consumers don’t take advantage of all the discounts that may be available to them.
“Many consumers foolishly throw money away because they fail to ask about insurance discounts for which they may qualify,” continued Flannagan. “Companies often offer some unique, regional, very specific and, at times, quirky discounts. When every dollar counts, some may be able to nickel and dime their way to big savings.”
Companies often have discounts on homeowners insurance for installing a security system, living in a gated community, updating the roof and/or wiring in a house, and remaining claim-free. Some of the more unusual discounts on auto insurance include discounts for teen drivers with good grades, graduating from certain colleges or universities, or carpooling. In addition, many companies are offering significant new discounts within the last five years that consumers may be unaware of. Check with your agent to see if any apply to you. These discounts can make a substantial difference in premium costs.
Mistake 3: You Can’t Take It With You: Consider Insurance in Estate Planning.
While your family gathers together for the holidays, it may be a good time to discuss your estate and final wishes.
Many people put their homes in trusts as part of their estate planning but fail to tell the agent that the trust owns the home. In those cases, the home is no longer insured since the owner is not on the policy. This can create major problems at the time of a claim.
Also, in order to avoid a larger estate tax bite, people sometimes don’t list valuables or collectibles as part of their estate. But these items require special coverage beyond a standard homeowners policy, or they won’t be insured. If there is a loss on these items, your heirs won’t be compensated and will be deprived of part of the gift you intend to make to them. Making certain that everything is properly documented–and insured–is crucial to guaranteeing that your final wishes are executed after your death.
Mistake 4: Not Assessing Your Biggest Asset.
Too often, people do not properly protect their biggest asset—their home! That leaves them vulnerable to devastating losses. This is particularly true with regard to a change of occupancy. Selling, renting or leaving your home for an extended period directly changes the terms and conditions of your coverage. When there is a loss, your insurance company can deny the claim because you are no longer in control of what happens to your home. That could cost you everything. Homeowners should check with an agent to learn the time limit on vacancy or change of occupancy before it alters or cancels the terms of the policy.
In addition, not having certain specialty coverage could cost homeowners dearly. Failure to purchase sewer and drain back up insurance, flood insurance, earthquake insurance, ordinance or law coverage, or to adjust coverage as property improvements are made could have detrimental consequences in the event of a disaster. Keep your agent apprised of any and all changes regarding your home, no matter how minor they seem.
Mistake 5: Taking the Cheapest Route.
The survey found that 25% of respondents thought price was the most important criteria when selecting an insurance policy. While price should be a factor in insurance decisions, choosing coverage based on price alone could ultimately be a costly mistake. Insurance policies differ widely, with varying deductibles, coverage limits and exclusions. Alarmingly, about 61% of survey respondents said they were only somewhat familiar or not familiar with the details of their insurance policies.