Insurance is a financial security in our lives that can act as a real shield in times of danger if we understand, verify, and consciously choose it. Unfortunately, many of us buy insurance just to be safe, but when we need it at the right time, it turns out that it is of no use.
Many people are making this mistake unknowingly, due to which they have to pay thousands of dollars in times of danger. The reason for this? Many of us do not pay attention to the complexities of insurance, the conditions of coverage, or the small and important things that are usually not clearly stated by the insurance companies.
As a result, our coverage is ineffective, and the claim is canceled. If you want your insurance to protect you in the future, then in this article, you will learn about 10 common insurance mistakes where the reason behind each mistake is explained in simple language, and what you can do to avoid them.
1. Treating Insurance as a Product, Not a Partnership
The Mistake:
Many people think of insurance as something that is bought once, as if it is a product. I signed the paper and put it in a file, paid the premium, and it will come in handy when needed.
Insurance is an ongoing relationship. As life changes, so do your needs. You may get married, the number of family members may increase, and your income may increase or decrease. But your insurance policy remains exactly where it was before.
When an emergency comes, it turns out that the coverage you are taking is no longer able to meet the current needs of your life. Maybe the insurance is not covering all the expenses, or the old name remains as the nominee. Then it is not only money, but also mental stress.
The Real Fix:
Consider insurance as an ongoing financial relationship. Review the policy at least once a year, such as when it is time for a birthday or tax return. Compare what has changed in your life with the insurance.
2. Only Reading the Policy Summary, Not the Schedule of Benefits
The Mistake:
The first thing many people do when they get a policy is to look at the coverage amount and premium and then file it without reading the Schedule of Benefits, Exclusions, or Terms & Conditions inside the entire policy.
When you go to claim, the company says, “Sorry, this type of treatment or incident is not covered.” But you thought everything would be covered. Seeing this, you get disappointed, angry, but the company is working according to the policy rules given by them. You are unaware and cannot understand the problem because you have not read the policy properly.
The Real Fix:
The company you are taking insurance from may be health insurance, car insurance, home insurance, or travel insurance. First, know the company’s policy and all the rules. Don’t forget to read the very last pages of the policy. If you don’t have time, at least read the ‘Exclusions’ and ‘Coverage Limitations’ sections. If you don’t understand, call the company’s customer service for details.
3. Using the Same Policy Without Re-Evaluation
The Mistake:
Many people think that once you buy insurance, you just have to renew it every year. But this is a completely wrong idea. Just as the insurance market changes over time, so does your lifestyle. The situation can change suddenly at any time.
Old policies often mean paying extra premiums or getting less coverage. But many times it is seen that new policies may offer more benefits at the same price, but you do not know about this.
The Real Fix:
Set a specific time, such as at the beginning of the year or during financial planning, to review all your policies. If you want, you can compare and find better offers from other companies and compare and see what benefits other insurance companies are offering for the same thing.
4. Choosing the Lowest Premium Without Understanding Deductibles
The Mistake:
The first thing most people look for when buying insurance is “How low is the premium?” Many people think that the lower the premium, the better the benefit. For this reason, they choose policies that have low premiums but later find that the policy conditions have high deductibles, limited coverage, or many important exclusions.
Low premiums do not mean that your costs are low at all, but many times, there are hidden conditions behind low premiums, which put the entire burden on your shoulders in times of danger.
The Real Fix:
When buying insurance, you should not only look for savings, but also coverage, benefits, riders, and support. First, check not only the premium, but also the Deductible, Coverage Limit, and Claim Ratio. A slightly higher-priced policy may save you thousands of dollars in risk.
5. Not taking extra riders or add-ons
The Mistake:
We think that insurance companies offer riders because they just want to charge more money. So we don’t have the basic policy, but we don’t have the necessary extra security.
For example, let’s say someone suddenly has a stroke, which is not covered by regular life insurance, but if you had taken the Critical Illness Rider in advance, you could have received a large lump sum.
Examples of underused but powerful riders:
- Critical Illness Rider (Life/Health)
- Zero Depreciation Rider (Auto)
- Waiver of Premium (Disability)
The Real Fix:
Choose the appropriate rider according to your type of work, family history of disease, or age. Although these are small additional costs, many times a small rider can save you from big losses in a big accident.
6. Filing a Claim Without Proper Documentation
The Mistake:
Many times, the company cancels the claim due to a hasty and incorrect application during the claim. During an accident or illness, many people suddenly get emotional and go to the insurance company to claim, but if the necessary documents, evidence, and reports are not provided properly, the company cancels the claim.
Due to which the cost of your treatment or car repair falls on your shoulders. And then you think, the insurance company cheated.
The Real Fix:
Before filing any claim:
- Take photos (accident, damage, hospital records)
- Get police or doctor reports (depending on claim type)
- Document everything in writing
Before filing a claim, call the company once and understand the entire process
7. Relying only on office group insurance
The Mistake:
When the office is providing insurance, why should I take it separately? I see it as a bonus, but what if that is the only insurance? Many people think this. But they don’t realize that if you change offices, that policy will no longer be available, the coverage is limited, and sometimes there are no nominees in the names of loved ones.
The Real Fix:
Have a personal insurance policy in your name that is only for you and that is not dependent on your job. It will last until your own life, and will not change with job changes.
8. Ignoring Out-of-Network Costs in Health Insurance
The Mistake:
When we get sick, we go straight to a known hospital, thinking that insurance will cover it. But what if it is not in their network? The result is that after surgery or treatment, the insurance will not pay anything, and you will have to pay the entire bill.
The Real Fix:
Before going to the hospital, check carefully whether the hospital you are going to is in their network by going to the mobile app or the insurance company’s website.
9. Home or car insurance coverage at market value
The Mistake:
Your house or car is worth $100,000 and you insured it accordingly. But if you go to rebuild it and it costs $150,000, where will you get the rest of the money? Then, if you go to the insurance company, they will say they can cover up to $1 million and not more.
The Real Fix:
When buying insurance, buy insurance with “Replacement Cost” or “Rebuild Value” so that even after a complete loss, you can come back as before. And so that if you ever need more than the amount of insurance you have taken, the insurance company can cover the rest of the amount.
10. Know what is not covered
The Mistake:
Everyone looks at the benefits of the policy, such as hospital cover, money after death, and car accident cover. But they don’t look at what is not covered. The policy states what is covered and what is not covered, but many people are lazy and don’t look at what is not covered.
But when faced with natural disasters, pre-existing conditions, or non-medical treatments, they find that the insurance does not cover them, and they are surprised and cannot understand why the insurance does not cover them. As a result, they do not get any money even after making a claim.
The Real Fix:
When taking insurance, take a good look at what they do not cover, and of course, ask this question while taking insurance: “In what situations will this policy not help me?” This one question can save you thousands of dollars in losses.
Conclusion
Insurance is a financial security that, if not used properly, can lead to financial losses. Sadly, most people forget about it after taking out insurance until disaster strikes. Then they may find that their coverage is not working or that compensation is not being collected due to small mistakes.
Remember, if insurance is used properly, it is not an expense, but a wise investment. If you consciously stay away from these mistakes, you will not only save money, but also your time, peace of mind, and the safety of your family.
