Insurance – Crucial Do’s and Don’ts


Insurance is what you purchase to provide a safety net against the unexpected. You may feel that you have received less insurance than you deserve when you file a claim. You can’t help but feel that all those premiums you paid over the years have been wasted. These are common insurance pitfalls that you should avoid in order to get the best value for your money.

Life Insurance: Your life insurance policy should not be used as a savings account. If you really need a term policy, don’t buy a cash-value life policy. A 401(k), if you are looking to save money for your retirement, is the best option.
Do not delay in purchasing life insurance and do not underinsure. As a rule of thumb, you should consider at least ten percent of your annual income for the amount that you want to provide for your dependents. The main purpose of life insurance is to provide financial support for your dependents when you are unable to.
Your agent should not decide what is best for you. You must understand all terms and conditions of your insurance policy.
– Don’t treat your purchase of life insurance as a one-time activity. Remember, needs change over time.
It is better to purchase a whole life insurance policy than just Accidental Death/Travel Accident insurance. Although it may seem more expensive at first, it will end up being cheaper over the long-term.

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Home insurance:
Don’t confuse what you paid for your home with the rebuilding costs. Land is almost indestructible. Including land in your estimate for rebuilding your home will only increase your premiums and not result in corresponding returns. You are paid when you claim to repair or renovate the structure.
– Copy and paste your home insurance policy word by word. Don’t assume anything. You might find yourself in an area that is prone to flooding or earthquakes. If this happens, you may need additional coverage. Your policy may also have a separate deductible to cover any damages resulting from these major disasters.
Before buying a home in an area, make sure you verify the insurance requirements. Many large home insurance companies left the area after Hurricane Katrina. Before you purchase a property, make sure to check the rates and coverages offered by local companies.
– Make sure you inform your home insurance company immediately after you make any changes or additions to your home. Homeowners can lose their claims if they don’t update their insurance company on any changes.
Ensure that you check the coverage of your group housing or condominium plan to ensure you don’t buy duplicate coverage. To cover all aspects of your life, it is a good idea to add to the policy.

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Car insurance:
– Insuring your vehicle to comply with your state’s basic liability insurance requirements is not a good idea. Limit your liability to a much greater extent. Minimum state-mandated liability for AZ auto coverage is 15/30/10. If you are found at fault for an accident, and the bill from the aggrieved party is greater than this, you will be responsible for paying out of your own pocket. Imagine if you were to hit a doctor or a car with children. Can you see the financial consequences?
It’s not a good idea for your car to be underinsured. However, many people make the error of over-insuring it. If your car is very old and has little resale value, keeping collision and comprehensive doesn’t do much. When your car turns seven years old, you can drop collision coverage and get comprehensive coverage if it is more than 10 years old.
Ensure that your insurance company approves of any modifications to your vehicle before you make them. Modified engines are not covered by most insurance companies.
When filing a claim for your vehicle that has been totaled, make sure you know what the blue-book value of your car. It is a good idea to compare the purchase values of five similar cars in your local area, and then calculate their costs. This is what your car insurance company should pay you for the totaled vehicle, unless it was insured at an agreed price.
After purchasing a car, people realize how costly insurance is. Compare the insurance costs of different cars to determine which model is more affordable before you buy your car. This will save you a lot of money and prevent disappointment later.

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Bethany Collins lives with her husband, two children and is a Work at Home Mother. She enjoys reading and surfing the internet for money-saving tips, recipes, and other useful information. She writes about personal finance (home, life, and car insurance), budgeting, and other investment options) and also grows organic vegetables in her small garden.