How Consumers Can Maximize the Value of Their Insurance Policies

Fifty-eight percent of drivers believe they overpay for car insurance. For those who bundle insurance policies, one-third of consumers say they will switch their homeowners’ insurance if they switch their auto insurance this year.

In honor of National Insurance Awareness Day on June 28, here are some ways consumers avoid mistakes and maximize the value and benefits of their insurance policies.

Connect With a Reputable Insurance Agent

When shopping for homeowners or auto policies, connect with a reputable captive or independent insurance agent. They can help assess your auto, home and lifestyle risk factors, appropriate deductibles and any special coverage needs (expensive jewelry, collectibles etc.) to determine the most appropriate coverage approach and strategy.

Don’t forget to research and read plenty of customer reviews about their experience with the insurance carriers you’re considering.

The agent can also help you navigate and understand the nuances of the auto and homeowners’ insurance policies to provide deeper explanations of potential gaps in terms of what is and is not covered and any coverage conditions, limitations or exclusions.

Ask Questions

There’s nothing more frustrating than experiencing a loss and then finding out that it’s not fully covered. Did you know most homeowners’ policies limit the amount they will pay out for items like jewelry, cash, or firearms? Also, homeowners’ policies typically include exclusions for damage from floods, certain types of water damage and other loss scenarios that many consumers are unaware of that may come into play in the event of an incident.

Insurance policies include a variety of terminology and definitions you may not have heard before. Don’t let that make you feel overwhelmed or dismayed! Insurance is complex and important; you deserve to feel confident in your investment and protection choices. Read, ask questions and ensure you fully understand your policy’s conditions, exclusions and limitations, in the context of your risk profile, before purchasing coverage.

Consider Your Risk Profile 

When purchasing auto insurance, assess how much coverage you need based on your risk profile. For example, suppose you own a 15-year-old high-mileage vehicle in an average condition that serves as your basic transportation around town. In that case, you may omit collision or comprehensive coverage because the cost of premiums, when annualized over a relatively short period, may quickly exceed the vehicle’s value.

Let’s continue with that example and discuss liability coverage. Suppose a consumer carries $500K in auto liability limits, collision and comprehensive coverages. To save premium costs, they lower their liability limit to $50K and drop collision and comprehensive altogether without taking a few moments to assess risk. In this case, they may have put more of their personal assets at higher risk if they are found liable for damages that exceed their limit of liability or their vehicle is totaled as a result of an accident.

Lastly, another less common mistake with auto claims centers around policyholders being financially “upside down” when the involved vehicle was deemed a total loss. This occurs when the vehicle loan amount exceeds the vehicle’s value due to loans being front-loaded with interest payments and vehicle depreciation. Consumers can easily solve this by adding a loan or lease gap coverage endorsement as part of their auto policy purchase. While this coverage endorsement is standard on many auto policies, it’s important to confirm as you shop for auto insurance policies.

Remember, Cheaper is Not Always Better

Ensure you understand the impact of higher deductibles before it’s too late. A higher auto or homeowners’ deductible may sound like a good idea due to the premium savings; however, when a loss occurs, you may underestimate the financial burden and pain the higher deductible causes. Taking a little more time to realistically figure out what you can reasonably afford in the event of a loss may lessen deductible sticker shock at the moment of truth.

When purchasing coverage, if you want to save money, ask about multi-policy bundling and good student driver discounts (if applicable) or other available savings opportunities.

Regularly Review Your Insurance Policies to Ensure You Have the Coverage You Need

Consumers sometimes take a set-it-and-forget mindset when it comes to purchasing insurance policies. This is a potentially costly mistake.

Life events can be unexpected, and things change—big and small—every year. Maybe you changed jobs and now drive less, perhaps you recently renovated your kitchen, or, consider larger economic factors, like the current run-up in building material and labor costs increasing the average square foot replacement expenses for homes over the past few years that could render a consumer underinsured if they suffer a significant dwelling loss.

There are a variety of life events that may require re-evaluating your rates. Every year on June 28, set a reminder to reexamine your policies and coverage to ensure you remain appropriately covered based on life changes, risk profile, appetite and assets.