Tuesday, 19 March 2013

Four places where you're spending more than you need on home insurance

As we discussed recently, likely the largest financial investment you will make in your life is in the property you reside in. Not surprisingly, then, many options have evolved over time in terms of ways that you can protect this investment. This is certainly true of the home insurance aspect of protecting your property: there is a great deal of customization available to you. This is to your advantage, not only because it ensures that you are getting specifically what you need, but also because it ensures that you are spending only exactly what you need to in the areas that will best serve you. With that freedom comes the responsibility of making sure that you are getting precisely what you need. All too often, people treat insurance as something that has to get done, thinking of it simply as something to do a quick and dirty job of just to tick it off the list. If that's you, you may be losing money on your insurance plan. Here are the most common ways this happens:

Settling for the first option you find. You are your primary advocate. This has to be the case simply because nobody knows your circumstances and needs as intimately as you do. The only way to ensure that you are meeting those needs is to communicate them clearly to a potential provider, and then to critically assess how well this provider is willing and able to meet them. To maximize success in this endeavour, it is necessary to: (A) ask plenty of questions, and (B) speak to plenty of providers, choosing the one that best meets or (ideally) exceeds your expectations.

Buying more coverage than you need. We certainly don't advocate skimping on the coverage you need. After all, nothing is more wasteful than buying into an insurance plan that doesn't give you the coverage you need in the end. That said, you can assess whether it is unlikely for you to face a certain type of calamity, and if it is, to opt out of that coverage. Do this with caution though: there are many types of crises that simply cannot be anticipated (such as fires and thefts). And if you do go this route, do so realizing that it may cost you more if you do have to make a claim.

Purchasing separate plans. Your home isn't the only item you are insuring; you have at least one other item you are paying insurance for in your vehicle. Are your home and your vehicle insured separately, perhaps by different providers? If so, you are likely losing money here. In this regard, insurance is a bit like phone/internet/cable plans: you get better rates when you take a package. Note, however, that this doesn't automatically mean that all insurance packages are necessarily cheaper than patchwork plans. You still have to shop around to ensure you're getting the best rates.

Trying to DIY. Certainly there is a higher upfront cost to seeking the advice of a professional. Many people seek to bypass that preliminary cost by doing the research themselves. If you are considering this route, be honest with yourself about your capabilities. Are you sure that they will match the expertise of a professional? Will you find yourself the best rates and know how to navigate the terminology and the insider's resources that a broker has access to? The last thing you want to do is work hard to find the cheapest rate possible, only to find—at the time of crisis—that your coverage is next to nil. Remember that the cost of a professional is a one time thing; the cost of a DIY mistake could be ongoing.


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