Back to Basics: 9 Common Insurance Mistakes to Avoid

Life insurance can be an important piece of the retirement planning puzzle.

Having at least a basic insurance plan is essential for anyone. While many jobs cover your insurance needs, not all of them do. It's important to figure out what insurance plans you need and what works best for you and your family. 

Choosing an insurance plan can be complicated. It may be you are grossly underinsured or it may be you are grossly overinsured? However, when choosing life insurance, try to avoid these mistakes. 

Mistake #1: Not Having Insurance

Whether you're trying to save money or think you're young enough to get by without it, foregoing basic insurance coverage can be an incredibly costly mistake.

When it comes to health insurance, you have options. If your employer does not provide coverage, you can choose to obtain a policy through the Marketplace. There are different levels of coverage, from catastrophic (cheapest) to gold (typically the most expensive). If cost is an issue, even obtaining catastrophic coverage can be better than nothing. As you compare plans, look into what premium tax credits may be available to use, as these can help offset your monthly premium costs.

Mistake #2: Not Having Enough Insurance

Less comprehensive coverage or basic insurance plans can equate to lower premiums every month. The problem is - you’re likely to make up the difference anyway when it comes to your deductibles and out-of-pocket expenses. By not giving yourself enough insurance coverage upfront, you’re taking a gamble of whether or not you’ll actually need to use it. One broken bone or a fender bender could quickly cost you more than if you had paid the higher premiums upfront.

Mistake #3: Over Insuring Yourself

Talk to an insurance agent to figure out the right amount of insurance for your specific circumstances. Just as you don’t want to under-insure yourself and your possessions, over-insuring could be equally as costly. 

Mistake #4: Not Asking for Discounts

If you don’t ask for a discount, then you may never know if you would have gotten one or not. There are possible hidden discounts you can qualify for, but if you don’t tell your agent and ask what you can get, they will never know that they need to apply them to your account. 

Mistake #5: Not Looking Around for New Policies

You should be shopping around for a new basic insurance policy every few years. In some instances - especially if certain circumstances have changed - you can save money by updating your policy or switching providers. Some insurance companies may even offer discounts based on things like where you work or where you went to college. 

Mistake #6: Misunderstanding Your Policy

Make sure that you understand what your policy covers, under what circumstances it can be used and what you can still expect to pay out-of-pocket. Having a thorough understanding of your policy now means avoiding unwelcome surprises when it’s time to file a claim. 

Mistake #7: Opting Into Group Life Insurance Automatically

If you choose to take advantage of your company’s group life insurance policy, remember that your rates aren’t locked in - they could go up. Consider any additional life insurance offerings provided through the workplace carefully before signing on. You should know exactly what you’re paying for, and if the premiums are worth the potential benefits in your particular situation. 

Mistake #8: Getting Rid of Long-Term Care Insurance

If you’re notified that your premiums are about to rise, you may be inclined to drop your long-term care policy. However, it’s important to remember that purchasing a new plan may cost even more, especially since you are now older than when you first purchased your original policy. And foregoing long-term care coverage altogether puts you and your family at greater risk of future financial turmoil.

Mistake #9: Picking a Health Policy on Premium Alone

You may think that you are saving money because the premium is low on your insurance.  Insurance companies, however, can sometimes find less obvious ways to make their money back. 

Some examples include:

• Higher copays during doctor visits
• If a doctor’s visit is out of your network, out-of-pocket costs may be higher
• Prescription drugs may be more expensive

Consider how often you visit the doctor’s office annually and any prescriptions you’re currently on. This can help you find an insurance policy that covers what you need without breaking the bank. 

Whether you’re looking at health, auto, life or any other insurance policy, there are plenty of considerations to keep in mind. If you are choosing a plan through your work, make sure you are speaking to someone who works at the insurance provider to get all the answers you need. If your work does not cover your insurance, speak to representatives at the insurance company and your financial advisor to help make these decisions. 

You Need A Plan

A goal of retiring - without a plan to get there - is simply a plan to never retire. Retirement isn't some magical age. It's a dollar amount. If you're age 50 or over and still in the accumulation phase (pre-retirement) we can help you figure out where you need to go and how to get there. If you are retired or nearing retirement, we can create a plan which will outpace inflation and possibly leave a legacy to your family. The consultation is free and without obligation. Contact us to set up a consultation.

For more articles about retirement planning and investing, click here.

Thanks for reading!

Brian Coleman/Retirement Income & Investment Planner

80/20 Financial Services is an independent Registered Investment Advisory Firm. We help clients age 50 and over plan their retirement income and investment strategies. Contact us today for help with your retirement needs.