8 Common Insurance Mistakes to Avoid
Having at least a basic insurance plan is essential for everyone. While many employers provide insurance for their employees, not all of them do. Hence, it's important to figure out what insurance plans you need and what works best for you and your family.
Choosing an insurance plan can be complicated, and it's easy to make mistakes. So, here are some mistakes to avoid when choosing your insurance plan.
Mistake #1: Not Having Insurance
Whether you're trying to save money or think you're young enough to get by without it, foregoing basic insurance coverage can be an incredibly costly mistake.
When it comes to health insurance, there are several options available. If your employer does not provide coverage, then you can choose to obtain a policy through the marketplace. There are different levels of coverage, from "catastrophic" (the cheapest option) to "gold" (typically the most expensive). If cost is an issue, purchasing catastrophic coverage is generally better than having no coverage at all. As you compare plans, look into what premium tax credits may be available to use, as these can help offset your monthly premium.
Mistake #2: Not Having Enough Insurance
Purchasing less comprehensive coverage or a basic insurance plan can equate to a lower monthly premium. However, the problem with this approach is that you're likely to pay the difference in price in deductibles and out-of-pocket expenses. By not giving yourself enough insurance coverage upfront, you're taking a gamble on whether or not you'll actually need to use it. One broken bone or fender bender could quickly cost you more than if you had paid a higher premium upfront.
Mistake #3: Over-Insuring Yourself
Talk to an insurance agent to figure out the right amount of insurance you need for your specific circumstances. Just as it's important to avoid under-insuring yourself and your possessions, it's critical to not over-insure yourself because it could be equally as costly.
Mistake #4: Not Asking for Discounts
If you don't inquire about discounts, then you may never know if you would have been eligible for and received any discount. There are possible hidden discounts that you may qualify for, so remember to discuss your circumstances with your agent and ask them about discounts so they can apply them to your account.
Mistake #5: Misunderstanding Your Policy
Make sure that you understand what your policy covers, under what circumstances it applies, and your out-of-pocket expenses. Thoroughly understanding your policy from the beginning means that you will avoid unwelcome surprises when it's time to file a claim.
Mistake #6: Automatically Opting into Group Life Insurance
If you choose to take advantage of your employer's group life insurance policy, remember that your rates aren't locked in—they could go up. Carefully consider any additional life insurance offerings available through your employer before signing on. You should know exactly what you're paying for and whether the potential benefits are worth the premiums for your particular situation.
Mistake #7: Getting Rid of Long-Term Care Insurance
If you're notified that your premium is about to increase, you may be inclined to drop your long-term care policy. However, it's important to remember that purchasing a new plan may cost even more, especially since you are now older than when you first purchased your original policy. What's more, foregoing long-term care coverage altogether puts you and your family at greater risk of future financial turmoil.
Mistake #8: Picking a Health Policy on Premium Alone
When the premium is low on your insurance, you may think that you are saving money. However, insurance companies can sometimes find less obvious ways to increase the overall costs for their customers. For example, they may implement higher:
- Copays for medical appointments
- Out-of-pocket costs for medical appointments outside your network
- Prescription drug costs
Therefore, it's important to consider how many medical appointments you usually have in a year and your current prescriptions. This can help you find an insurance policy that covers what you need without breaking the bank.
Whether you're looking at health, auto, life, or any other type of insurance policy, there are plenty of factors to consider. If you are thinking about purchasing a plan through your employer, make sure you speak to someone who works at the insurance provider to get all the answers you need. If your employer does not cover your insurance needs, speak to representatives at the insurance company and your financial professional to get the information you need to make the decisions about your insurance.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.