30 Bad Insurance Habits That May Cost You

We all have some bad habits, but bad insurance habits can be financially devastating. Making sure that you have the best value for car, home, renters, business, health and life insurance and making timely payments is a good start. But that’s not all. Here are the 30 most common bad insurance habits that Americans have. If any sound familiar to you, you may want to make a change right away!

Key Takeaways Being uninsured or underinsured may result in major financial setbacks. Having too much coverage is a waste of money, so pay attention to details and do some math when shopping for insurance. A solid financial plan should be to turn around bad habits and save money on insurance bills. If you’re not comparing insurance quotes at least once a year, you’re probably paying too much in premiums.

1. Late Insurance Payments

It’s a vicious cycle if you’re low on cash, so avoid late insurance payments at all costs. If you skip just one, it hurts your credit score and you will pay more in insurance premiums due to a poor insurance score. Worse yet, your policy may get canceled and a lapse in insurance raises premiums significantly. Do this enough times and you may have a hard time getting insured.

2. Lapses in Coverage

Even a day’s worth of a lapse in coverage will raise your premiums exponentially. This is because you’ll be pooled in with higher risk individuals, and that pool pays more for insurance. This is true for car insurance, health insurance, business insurance and homeowners insurance.

3. Too High a Deductible

If you don’t have an emergency fund that meets your deductibles, you may have a problem because you won’t have enough money to cover repairs to your home or your vehicle. If you pick a high deductible health insurance policy, you may be pretty much paying for all services in a given year. It’s still great that there’s a limit to how much your out-of-pocket expenses will be, but it won’t really be of much assistance when seeing doctors or getting imaging.

4. Too Low a Deductible

If you don’t file claims unless absolutely necessary and you’re really having trouble making timely insurance payments, increasing your deductible will lower your monthly bill. Just save up for that higher deductible – just in case.

5. Filing Small Insurance Claims

If you can afford to fix a repair that is less than, equal to or only a few hundred dollars more than your deductible, there is a price to pay for it: your insurance rate will increase, meaning you’ll pay more overall than if you’d fixed the repair out-of-pocket instead of filing a small claim.

6. Having Minimal Coverage

You may think you’re saving money by buying the state’s minimum liability coverage or insuring your home at a value that is less than what it’ll cost to rebuild it, you’ll be sorry if the worst ever happens. Not only are vehicles more expensive than ever to fix or replace, so are homes. Make sure you’re buying adequate coverage limits.

7. Not Creating an Inventory

Let’s say an unexpected disaster, like a fire, destroyed everything you own? Where would you start in trying to make your life whole again? How would you put a price tag to everything, let alone remember every item you owned? Having a home inventory is important for the purpose of setting limits on content coverage in a homeowners insurance policy. Not only will it come in handy after a crisis, it’ll help you determine how much coverage you need. It may also help you decide if you need any special riders, like for an engagement ring or luxury watch, which may go over limits.

8. Not Having an Emergency Fund

If you do not have enough money to pay a deductible after an accident or there is damage to your home, you may not have enough to cover repairs. If you have a PPO plan and a deductible on your health insurance, you will have to pay for services until you reach the deductible. Without an emergency fund, you may have to pay with a credit card, and that means you’ll be paying interest on the debt.

9. Not Buying Renters Insurance

It may not be required by your landlord, especially if you’re only renting out a room, but buying renters insurance will save you thousands of dollars if a storm, fire or other disaster destroys all your possessions. Your landlord’s insurance policy will not cover it nor will the policy of the homeowner renting out the room. Without the ability to file an insurance claim, you’ll be left with no choice but to replace everything on your own.

10. Driving Unsafely

When you get a ticket for speeding, weaving in and out of lanes, driving recklessly, or if you’re caught running a stop sign or red light, you will accrue points on your license. The Department of Motor Vehicles (DMV) reports this fact to your insurer, who will raise your rates come renewal. All insurers will be aware of your driving history and will charge you more money. So, you’ll be left with an expensive ticket and higher monthly bills for not driving safely.

11. Driving Under the Influence

Alcohol is the leading cause of Driving While Intoxicated (DWI) or Driving Under the Influence (DUI), but it’s not the only substance that qualifies for the charge. Prescription drugs, cannabis, even over-the-counter drugs that make you drowsy may get you a charge that may result in jail time, expensive fines and exponentially higher car insurance premiums, with an added requirement: an SR22, a certificate your insurer has to file on your behalf to prove to the DMV that you are insured. Some insurers don’t want to be bothered, others will make you pay dearly for coverage as a high-risk driver!

12. Having a Swimming Pool Without Fencing

You need a fence around a swimming pool because even injuries to trespassers fall on the homeowner. Children are especially prone to sneaking onto unoccupied property if they think they can play without getting caught. If they are hurt, the liability portion of a homeowners insurance policy will cover you, but if you don’t have a fence, you may not be fully covered and will have a hard time holding onto the policy unless you erect a secure fence. But you’ll be paying higher premiums if there was a claim filed against you regardless. If you have a pool and no fencing, you’ll probably see a rate reduction after putting up a fence.

13. Having a Trampoline With No Fencing

A trampoline is much like a swimming pool in that insurers see it as what they call, “an attractive nuisance” that invites trespassers and courts injuries. You’ll pay more in homeowners insurance premiums for having a trampoline without a secure fence.

14. Buying Life Insurance Later in Life

Life insurance only gets more expensive each year that you hold off on buying a policy. Premiums will still continue to increase as you get older, or if you have to renew a term-life policy, but not as much as buying a new policy as a senior. It may still make financial sense to buy a policy later in life if you don’t have one. Do the math and consult a financial advisor about the costs and benefits of buying when you’re well into your 70s or 80s.

15. Being Underinsured

You may buy the cheapest health insurance policy on the market or buy the minimum state requirements for car insurance thinking you’re saving money but what happens if something goes wrong. You may have to pay for medical care out-of-pocket until you meet a deductible of a few thousand dollars. Or, you may have to reach into your pocket to pay for damages you caused if your liability limits were insufficient to cover all the fixes the other driver needed on their vehicle.

16. Not Repaying Life Insurance Loans

Unless you’ve decided that you don’t need to leave behind the full death benefit to your designated beneficiary or beneficiaries, not repaying a life insurance loan on the cash value of a permanent life insurance policy may decrease the death benefit. If the loan is a particularly large one that depletes most if not all of the cash benefit, your policy will stop paying its own premiums. You will need to begin paying premiums on a monthly basis to prevent cancellation of coverage.

17. Not Reviewing Policies Before Renewal

Administrative errors happen and so do misunderstandings. Not only that, but you may need to drop certain coverages or add some on, depending on what your situation is. You may want to reconsider the limits of liability coverage based on the fact that the average new car costs over $40,000. If you cause a car to be totaled, you’ll only get coverage for the limits you’ve selected. Make sure the household members listed on your policy still live there, and consider excluding a teen from your car insurance, to save a bunch. But if that teen gets into an accident in your car, you won’t be covered.

18. Not Understanding Coverages and Exclusions

Understand essential insurance basics, like the fact that liability coverage never covers you, only the other drivers when you’re at fault. Only collision coverage would cover you in an accident that you caused. Comprehensive will cover theft and vandalism of the car and if you hit an animal unintentionally. There are other coverages too, like roadside assistance, and more. Make sure to go over all coverages and consider whether or not they’d be beneficial to you. For instance, if you have an older car, you may not want collision coverage because it’s worth about the same as the deductible (or a couple of hundred dollars more) but you may want roadside assistance coverage because an older car is more prone to break down.

19. Forgetting To Report Life Changes

Your insurance policies may not immediately come to mind, when moving or getting married or divorced. However, these and other major life events often impact insurance rates or may even invalidate coverage. For instance, health insurance policies often cover a specific region so you may lose coverage. Also, married people pay less for car insurance so be sure to tell your insurer when you tie the knot. A home renovation or home modifications for seniors will change a home’s value and rebuilding costs, which need to be reflected in your home insurance policy.

20. Not Asking About Discounts

Discounts can be stacked and may save you hundreds of dollars a year. When comparing rates, ask agents about the discounts the company they represent offers, because they vary. Most insurers have bundle discounts for insuring both home and auto and good student discounts. Some even offer discounts by profession, affiliation and alma mater.

21. Not Documenting an Accident’s Damages

If you can, photograph the scene of a car accident from various angles and take photos of damages to your car and the other car. Having too much documentation is better than having none. You’ll submit these photographs to your insurer when filing a claim. The photos may help determine how much damage was related to the accident. Video of the scene and damages is also an option.

22. Not Keeping Receipts

Keeping and organizing receipts for possessions and repairs is important. Repair receipts will help you get the right amount if you file a home insurance claim for damages and/or theft or a car insurance claim after an accident or vandalization of the vehicle. Without these receipts, it may be hard to prove you need the amount you’re hoping to receive.

23. Thinking Work Sponsored Life Insurance Is Enough

Work-sponsored life insurance may or may not cover a funeral. The average funeral costs around $8,000 so it may be a good idea to buy burial insurance, which may be as inexpensive as $10 a month. If you’re hoping to leave behind a benefit to help pay off a mortgage or as a gift to loved ones, you’ll need a term life or permanent life insurance policy. Both options become more expensive as you age, so buying earlier is a good way to save some money in costs.

24. Not Adding Roadside Assistance Coverage on an Older Car

Roadside assistance coverage is a wise thing to have on any car, because towing or emergency fuel service can be expensive without it. For an older car, it is a must. An aged car is more likely to experience mechanical problems that disable it while driving. Having

25. Neglecting To Buy Long-term Care Insurance Around Age 55 to 60

Long-term care insurance is another important product that increases in pricing as you age. You can either pay a lump sum into a policy account or make monthly premium payments to keep your policy active. Long-term care insurance will pay for caregivers or home health aids and assisted living costs, but up to specific limits. Different plans have different daily coverage limits and long-term duration limits so pay attention to details when shopping for a policy.

26. Not Buying Home Insurance After the Mortgage Is Paid Off

Just because the financial institution you had a mortgage with no longer requires home insurance coverage doesn’t mean you don’t need to continue insuring your home. One major storm or an unexpected accident on the property may cost you several thousand dollars, without any help if you don’t keep your policy active.

27. Buying Full Coverage for a Car Worth $3,000 or Less

Insurance on a vehicle is a must but it’s also important not to be wasteful with your hard-earned money. Do some research on Kelley Blue Book or Edmunds to see what the market value of your car is, based on its year, make, model and mileage. Look at the deductible amount and subtract that from the market value of the car and you’ll see the maximum amount you’d get back after filing a claim for a total loss. If you’re paying more in premiums and the deductible than the car’s value, drop collision and comprehensive coverages.

28. Insuring a Home Based on the Market Value

The amount of money you’ll need when paying for repairs to damages to your home will be based on rebuilding costs, not how much your home is worth. It’s a good idea to adjust your coverage limits as rebuilding costs change, like if you renovate your home or build an addition. Also, pricing on construction materials change, based on market trends, so be sure to get a reliable estimate for a complete rebuild once a year from a trusted contractor.

29. Being Uninsured

Whether it’s health, car, life, home, renters or business insurance, it really pays to be insured. Shouldering an entire loss by yourself may be financially devastating otherwise.

30. Not Comparing Insurance Rates at Least Once a Year

It’s best to compare insurance rates every six months before renewal but make sure to do it at least once a year. Rates change every year and your insurance profile does too. Comparing rates will ensure that you’re paying the least amount of money for all your insurance policies.