Managing Risk and Purchasing Insurance

For many individuals, after buying a house or car, renting an apartment, or changing jobs, insurance is the first thing most consumers think about. To avoid risk, getting insurance quotes from insurance agents to immediately implement full coverage to a homeowners, auto, renters or health insurance policy, is a must. You need insurance just in case something ‘bad’ happens. But paying to much for insurance can be quite costly.

With good reason consumers pay close attention to their insurance coverage, although over-insuring becomes the problem because they are not thinking about the risks of going overboard on coverage. Evaluating individual insurance needs is all about making smart decisions that are not related to the benefits of purchasing high risk insurance. In the long run, consumers end up paying too much for insurance when they do not have to.

Managing Risk

The two mistakes many consumers make:

1. Trying to insure everything instead of finding an alternate solution for coverage and...
2. Believing that full coverage applies to every little detail relating to a property, car and so on.

As an example, if a homeowner owns a number of valuables such as jewelry, collectibles, etc., instead of purchasing more insurance to cover the valuables in case of a burglary, perhaps purchasing a safe would be the better decision.

Also keep in mind, consumers are not able to cover every minor mishap because the chance of it happening is slim and insurance rates would be sky-high. For instance, on many consumers’ auto insurance policies they will not find coverage for protection against a lawsuit from a passenger that was injured while riding in their car.

Purchasing Insurance

The best option for consumers is to insure themselves for only the occurrences that cannot be covered by an alternate solution.

Because purchasing insurance is a necessity, everyone needs to know these things before making a commitment to an insurance policy:

• Avoid making decisions that endanger your life, health and finances (ex. eat healthy food and exercise and do not smoke)
• Decrease the chance of loss by not participating in high-risk activities (ex. choose not to drink and drive, wear a seat belt, buy a car with air bags)
• Pay out of pocket by having a higher deductible and a lower premium (ex. a minor collision will cause you to pay, although you might have saved that already with your lower premium)
• Read over contracts carefully (ex. renting a room at a reception hall for your wedding legally binds you to any damage of their property, you take responsibility for the actions of your guests)

Consider managing the risks of your day-to-day activities because over insuring is not the answer. An Illinois resident would not purchase hurricane insurance, right? That is why it is important to form our decisions about insurance around our own personal lives rather than around the effectiveness of insurance coverage.

Published: Wednesday 11th March 2009