It is essential that you have basic insurance coverage especially during Recession. It is also important to realize that basic insurance will protect your assets and finances from an accident or another damaging situation. However it is common to make mistakes when it comes to insurance. Here are the six most common basic insurance mistakes to avoid.
1. Asking for the cheapest insurance
Asking for the cheapest insurance is the biggest mistake you can make. One day a customer ask me for 3rd party car insurance with the cheapest Insurance Company. He said that since 3rd party car insurance covers only the other people involved in a car accident (3rd parties), and will not him, he doesn’t care which company I will offer him as far it’s the cheapest in the market. I replied to him that I only offer the most expensive 3rd party car insurance to my clients, and I couldn’t help him. Just before he left he asked me why that is. I said to him that in 3rd party car insurance, 3rd parties are also considered all passengers of his own car, which usually are his wife and children, and in case of a serious car accident this cheap 3rd party insurance he is asking me to buy, will be the only cover his family will have, and I don’t want to deal with a cheap car insurance company when it comes to his family’s compensation. As a rule of thumb the cheapest it is the longer will take in court to compensate.
2. Choosing Not to Have Basic Insurance
Deciding to save money by not having insurance is a costly mistake that you do not want to make. You should have at least car insurance that covers accidents and thefts. You should have renter’s or home owner’s insurance to cover at least fire. Additionally you absolutely need basic health insurance. Medical bills can add up quickly and if you do not have it you can be crippled financially. If you cannot afford a comprehensive health insurance policy, you should at least get a high deductible or catastrophic health insurance plan. Many people struggle to afford health care, and going without may lead to bankruptcy if you have one catastrophic health event.
3. Over Insuring Yourself
Another common mistake that will cost you is to over insure yourself. It can be difficult to determine how much basic insurance you really need. This is especially true when you consider the liability insurance. You should talk to a qualified insurance advisor (usually an independent one is best) about your assets and how best to protect them.
4. under Insuring Yourself
Another common mistake is to under insure you. For example if you have health insurance you should consider the maximum amount your policy will pay. A €300.000 medical cover may seem sufficient, but if you were to have cancer or another major illness the costs of care may exceed that amount.
5. Getting the Wrong Insurance
You may have the wrong types of basic insurance or too many policies. You can waste your money buying policies that you are not likely to use. If you are young you do not need to get every type of insurance available. You should make sure you understand the policies that you are getting as well. If you understand what you signed up for you will not be surprised when it comes time to file a claim.
6. Getting the correct type of insurance with the wrong definitions of cover
You may have the correct type of basic insurance, but will be a waste of money and you can be exposed economically if you have the wrong definitions of cover. For example if you have a 10 year old house that you insure for €200000, and you have a fire damage of €100.000, the insurance company will pay you the 100.000 minus the an amount for natural wear and tear ( €20000 for example), if you have the ”indemnity” basis for compensation. Where if you have the ”new for old” compensation basis will pay you the exact replacement cost of the €100.000 damage. All of this provided that you insure the house at replacement value.
If you want any clarification or have any questions , please feel free to contact me at 22 26 96 46 or drop me an e-mail at firstname.lastname@example.org, or fill out the enquiry form below and I will be more than happy to answer you and give you a quotation if you are interested.
*Savvas P. Christoforou is a Chartered Insurer and managing director of Insurancelink Cyprus
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