3 insurance mistakes to avoid

You know that insuring your home, life, and car are important to your financial well-being. But are you making some common mistakes that might put you at risk? Find out and learn how to correct the situation with these tips.

Mistake #1. Not having enough life insurance. Basic company-paid life insurance provides a solid foundation of financial protection, but you’ll likely need more coverage to secure your loved ones’ future if something happened to you. To estimate how much you need, think “DIME:”

  • Debt: Add up your current debt and also include an estimate of your funeral expenses.
  • Income: Multiply your annual income by the number of years your family will need support.
  • Mortgage: Calculate your mortgage payoff amount.
  • Education: Estimate the cost of your kids’ college education.

Once you’ve completed your “DIME” needs analysis, add it all together and then subtract any savings you have. This will give you a final estimate of the financial protection your family may need if you’re no longer there to support them. And, don’t forget that stay-at-home parents need life insurance, too, to cover the cost of childcare in their absence.

Mistake #2: Selecting the minimum liability coverage on your car insurance. In many states, the minimum requirement for automobile liability insurance is far too low to cover the average cost of a car crash, meaning you could face significant out-of-pocket expenses. Buy at least the standard “100/300/100” liability coverage — $100,000 bodily injury per person; $300,000 bodily injury per accident; and $100,000 property damage.

Mistake #3: Skipping renter’s insurance. Even if you don’t own your home, insurance protection is still important. Renter’s insurance will help you cover the cost to replace possessions lost in a fire or burglary and the cost of moving out temporarily in the event of an insured disaster. It also provides liability coverage if someone is injured in your home. Keep in mind, as with homeowner’s insurance, you’ll need to add on coverage for floods, earthquakes, sewer backups, and other situations not included in a standard policy.

How much life insurance do you need?

Everyone’s life insurance needs are different. Watch this video for some basic information about life insurance and things to consider when deciding how much coverage you may need.

Money-saving tip!

Consider increasing your home and auto insurance deductibles to $1,000 to save with significantly lower premiums. Add some of that savings to your emergency fund so you’ll have cash on hand in case of a claim.

 

Source(s):
Insurance Information Institute; Consumer Reports Money Adviser; Kiplinger.com; Nerdwallet.com