Insurance can be complicated, but it doesn’t have to be intimidating. That’s why I wanted to share a list some of the common problems consumers often encounter in my years of experience. Hopefully, this will educate you about the realities of risk and inspire questions for you to ask your own agent.

Coming in at number one, Not knowing what you have currently.

If you don’t read any of the rest of this article, make sure you read this. Not having a clear understanding of what you are already paying for is the number one mistake.

The time to learn you have a major gap in your coverage is before you have a serious car accident or go through a flood or other natural disaster. Consider this: you are driving home from your child’s soccer game and get into a car accident. Unfortunately, someone in the other car is seriously hurt. Do you know how much your policy will pay on your behalf for this person’s injuries? These are known as the limits of liability, and the state required minimums may not be enough to pay this claim. In an even worse scenario where another person is killed, the costs will be even higher, and minimum limits of liability will quickly be reached. After this, you will have to pay out of pocket the difference, which could result in your future earnings being garnished for years to come.

The second mistake is not having Umbrella Insurance.

This mistake goes hand-in-hand with the first one. A personal umbrella policy is an often-overlooked policy that can provide very economical protection to you. Consumers often think that umbrella policies are only for high net worth individuals, but the truth is that they are a great addition to anyone’s protection plan, as accidents do not discriminate by tax bracket. This separate policy extends your personal liability coverage amounts beyond your home and auto liability amounts. For less than a dollar per day, you could purchase 1 or 2 million dollars, or more, of liability protection. This would pay legal fees associated with litigation resulting from an auto claim or injury at your home. Everyone should consider a personal umbrella policy, as none of us are immune to risk. Your agent can discuss the options and requirements to qualify, but they are relatively inexpensive for typical clients.

The third one, not having your deductible saved in cash, is a bit different.

It is very important to know exactly what your deductible is for your different insurance policies. For your homeowners insurance, it is probably a percentage of the insured value.

If the coverage amount on your home is $300,000, and 2% of that amount is your deductible, then $6,000 is your share of the cost to repair your home. If the damages are only a few thousand dollars, your policy wouldn’t pay anything in this case. This is why it is crucial to know your deductible, and be prepared for that possible expense. We recommend talking with your current agent if you are unsure at all about your deductible, or if you need to consider a different policy with a lower deductible.

The fourth mistake you can make is not purchasing flood insurance.

Virtually all homeowners policies exclude coverage for flood insurance. This means you have to purchase a separate policy to protect your property and contents from naturally rising water, like storm surge from a hurricane, runoff from heavy rain in a short period of time, mudflow or erosion along a lake. The National Flood Insurance Program statistics show that over 1/3 of federal disaster assistance payments are for people outside a high risk flood area. Flooding can happen anywhere, especially in areas of rapid construction growth.

If you are not in a special flood hazard area, then most lenders do not require you to purchase flood coverage. The good news about that is if you are in a low risk area, the premiums are very affordable. Ask your agent to run your address and provide a quote for your property and contents.

We often get asked about water damage claims, such as” what if a water pipe bursts”, or what if my hot water heater fails and ‘floods’ my home?” These are not a flood claims, as defined by a homeowners policy or a flood insurance policy. The scenarios described above are typically covered by homeowners policies, as long as it is sudden and accidental water damage as a result of a pipe freezing or bursting, unless your homeowners policy has an exclusion for water damage.  Again, our recommendation is to talk with your agent so you can be sure you understand the difference.

The fifth, and final mistake relates to the very first one. Not reviewing your coverage regularly or when something changes can be costly in many ways.

The benefit of reviewing your policy, and asking if you are eligible for lower rates, is that insurance carriers periodically change policies or add new policies to their menu. One very recent example is the trend of insurance companies analyzing your driving, either via app or device plugged into the car, to base your premiums on the miles you drive, and how safe of a driver you are. These programs are relatively new, and can save you money, especially if you are a good driver and drive fewer miles than average.

Another example is inflation protection on your homeowners coverage. Many insurance carriers will place a numeric percentage on your homeowners amount to account for inflation. For example, a 4% inflation number on your $300,000 home will cause next year’s renewal coverage amount to start at $312,000. This may only result in a minor increase in premium, but left unchecked for 7 or 8 years, the coverage amount can easily exceed the replacement cost. It could have increased to nearly $395,000, and if your replacement cost has not increased to that amount, you are being overcharged. Your agent can assist you in changing the coverage amount to match the current replacement cost.

Finally, the most important reason to talk to your agent is that your needs will naturally change with time. We often talk to client with gaps in their coverage, that is, areas in which they are exposed to risk and do not even realize it, or where the amount of protection they need has changed. We like to spend a few minutes with our clients going through a list of possible needs that aren’t being met when we review their coverage plan. Often, we can fill those gaps with a small, inexpensive policy that provides coverage to fit their exact needs, or with minor adjustments to their existing policies. We recommend talking to your agent about any gaps you might have, or any other questions on your mind.

Insurance can be complicated, but it doesn’t have to be intimidating when you’re working with an expert agent dedicated to protecting you and your family.