Four Things You Need To Look At Before Buying Any Insurance Policy
Posted on: 24 July 2017
Buying auto insurance is a bit different from buying homeowner's insurance, which is different, still, from buying renter's insurance. However, regardless of which type of insurance you are buying, it is very important that you understand the terms of the policy you are buying. Here are four things you need to look at before buying any insurance policy, whether it is a basic homeowner's policy or a specialty policy to cover a diamond ring.
The Premium
The term "premium" confuses a lot of people who are shopping for insurance for the first time. But in fact, this is just another fancy way of referring to your monthly payment. In other words, if your insurance premium is $60, that means you'll need to pay $60 each month to keep the policy active. Unless it is specified, you can assume any premium listed is monthly. When shopping for policies, you may find that some companies will also list the 6-month or yearly premium, but this will be labeled as such.
Check to see whether the 6-month or yearly premium will actually save you money in comparison to buying monthly. Some insurance policies will give you a discount if you pay for insurance once or twice a year rather than every month. This is most common with auto insurance policies, but you may see it with other policies, too.
The Deductible
The deductible is the amount you will have to pay towards the damages before your insurance kicks on. For example, if you have a jewelry insurance policy with a $100 deductible and your diamond ring is stolen, you'll have to pay the first $100 towards a new ring -- and then your insurance company will pay the remainder.
Before you buy a specific policy, make sure you can afford the deductible. There's no use taking out an auto insurance policy with a $2000 deductible, for instance, if you don't think you could come up with $2000 in an emergency. You may have to pay higher premiums for a plan with a lower deductible, but this can be worth it in the end.
Exclusivity Contacts
Does the insurance plan restrict who you can hire to do the work if you have to file a claim? This is more of an issue in some industries than in others. For example, it's generally illegal for car insurance company to tell you what repair shop you must hire to repair your car. However, some homeowner's insurance companies may specify that you have to hire contractors with certain licenses and qualifications to do any work that your policy covers. Jewelry insurance policies may require that repairs are made in specific shops. In any case, read through your policy details carefully so that you know who you can hire if you do need to file a claim.
Restrictions
A good insurance company should supply you with a list of specific instances in which your policy will not cover damages to the item you're insuring. For example, an insurance policy on your diamond ring may not cover damage caused by exposure to chemicals. Or, an auto insurance policy may not cover damage done if the driver was drunk when the accident occurred. Read through your policy information carefully to ensure you understand what the policy's restrictions are -- or otherwise you may abruptly find out you can't actually file a claim when needed.
Never buy insurance without fully reading the paperwork associated with the policy and specifically considering the factors discussed above. Also, make sure you talk with a reputable insurance agent if you're not sure which plan is best for you.
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