We all need insurance of one kind or another. As your family grows and changes, so may your insurance needs. But there are some basic pitfalls to avoid when buying family insurance which could affect you financially in the future.
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Typically a family will have more than one insurance policy. These can range from life cover and mortgage protection to home and motor insurance. Then there are often other policies we buy such as travel insurance, pet insurance, school pupil insurance and so on. Here are some pitfalls to avoid when you you are buying family insurance to make sure your family insurance is right for you.
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Common Mistakes When Buying Family Insurance
#1. Not Reading the Small Print
Do read the small print, as sometimes you may need to opt for a more robust policy or you may want to reduce cover.
Make sure you’re not buying any extras that you don’t really need. One year I paid extra for “car key insurance” on my motor insurance. Even though we have never ever mislaid our car keys, but the sales person was very persuasive and made me think I absolutely had to have it!
Read the benefits on all your insurances in detail as you may not need the same level of cover for everyone in the family.
#2. Over Insuring
Being over insured is something many of us are guilty of. When taking out insurance, think about the value of what you are insuring and get cover to match. Only insure your assets for their payout value.
For instance, if you insure the family car for a higher sum than it is valued at, you will probably pay more for the policy and will only get the replacement value placed on it by the insurance company if you do have to make a claim.
On other types of policies, such as health and life insurance, get exactly the cover you need now.
#3. Not Checking Across Policies
Don’t forget to cross check with other policies you have or that your employer may have covered on your behalf. So for example, your kids may be covered for some items through their school insurance so you might not need to include them on your health cover. Or your spouse could be covered by a workplace policy.
Or, for example, be aware of what insurances come with your credit card. Often items purchased using a credit card will be insured for a certain period of time.
Likewise check through your bank or other financial companies that you are signed up to, as often they offer different insurance cover as an extra or as an add-on that you could buy cheaper than signing up yourself. For example, our bank offers mobile phone insurance for our type of account, which can be handy for those smartphone accidents.
#4. Not Matching The Life Stage You Are At
You want to get the best policy for the life stage you are at now. It is a good idea initially to talk to an independent broker or financial advisor about all your insurances and use their expert advice to understand exactly the cover you need for the stage you and your family are at now.
Life insurance is a policy you need to get right. It needs to adequately support your family if the worst were to happen. Use an online calculator to help work out exactly what cover you and your family will need now and into the future. You can find these on most insurance companies websites.
Then make sure you review this every year or so to make sure you’re not paying for something you no longer need.
#5. Under Insuring
The most common case of under insuring is on home insurance. You need to insure for the re-building costs not the market value of your home.
For content insurance, you may also be under insured depending on what the replacement costs would be, so be really careful about what is and isn’t covered too. Items like expensive wooden floors, expensive kitchens, tech & gadgets, artwork, jewellery etc. all need to be listed to be covered. Be sure you have enough cover in place if you have to make a claim.
For those renting homes, you should take out insurance to cover your own contents as the landlords insurance may not cover these items and won’t cover your liabilities either.
#6. Not Shopping Around
Where possible use comparison sites and shop around. Travel insurance can be less than you expect, if you do your research. You can generally get quotes for most insurance policy types online and doing a bit of due diligence can really save you money over the long term.
Try to compare like with like. If you get vastly different quotes, it could be because you are not comparing the right features and benefits. Look at the features of each plan before committing to one.
#7. Not Checking What ISN’T Covered
Be sure to check what isn’t covered as this is sometimes as important as what is. Check in detail what is and isn’t covered.
And make sure you know if there are any conditions on cover. For example, mum Cliona points out that her house insurance “only covers my wedding rings if I submit a valuation every 2 years”.
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#8. Buying The Wrong Insurance
Carefully read the benefits of the insurance you are considering buying. Does it cover exactly what you need?
It may be that a slightly different policy will suit you better or that you may not yet need that type of cover just now, but will in later years.
#9. Not Checking What is Sent Through
Be sure what you signed up for is exactly what you need! Read the policy documents when they are sent to you, and ask questions if you are unsure of anything on the policy document.
You usually have a cooling off period where you can cancel the policy without incurring costs.
#10. Not Availing of Discounts at Renewals
Don’t be lazy when it comes to renewals. You may be surprised by how much you can save or what benefits you can add to your policy, if you shop around. If you don’t have time to do this yourself, consider working with an independent broker.
For policies such as life insurance, if you are considering changing companies, do look at the penalties of surrendering your policy early or making a change to your contract. You may be better to stick with the policy you have until it matures.
On health, home and car insurance policies check that nothing has been removed since your previous renewal. Remember you can switch insurance companies even if you have a pre-existing medical condition. Just like with car insurance, insurers must give you credit for the time you had with your previous insurer.
Insurance really does give you peace of mind and the hope for most of us, is that we will never need to make a claim. But if you do, following these simple rules, should ensure you are adequately covered for your needs.
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Have your say! Are there any other pitfalls for buying family insurance we have missed? Please share them in the comments box below.