Shopping for coverage isn't a favorite pastime for many of us. But paying attention to the insurance you're buying -- or not buying -- can avert big trouble later. Insurance is the product you buy in case the unthinkable happens. Unfortunately, by the time you need it, it's too late to make sure you have the right type and amount of coverage.
First, make sure you don't make any of the following seven mistakes while buying financial protection against disaster.
1. Not shopping around...or buying the first thing you see
The most common mistake is that people don't shop around for insurance, says J. Robert Hunter, the director of insurance at the Consumer Federation of America.
"When I talk to insurance consumers, there's this funny combination of fear and boredom," he says. They wind up going to one agent and letting that person handle all of their insurance needs."
Be proactive in your own health insurance.
2. Comparing only rates
When you're shopping around, it's best to look not only at prices but at companies' reputations for paying claims, says Kirk Okumura, the author and editor for the Life Underwriter Training Council Program at The American College in Bryn Mawr, Pa., where his responsibilities include writing study materials and textbooks for insurance courses.
You can check out insurance companies by looking at how they rank with third-party insurance rating companies, such as A.M. Best, Fitch Ratings and Standard & Poor's.
Also examine a company's complaint ratio. How many complaints have they had with the better business bureau? State insurance departments sometime publish this information, and the Web site of the National Association of Insurance Commissioners publishes these numbers.
3. Not comparing agents
Not all agents are created equal. First, make sure an agent is properly licensed, says Kansas Insurance Commissioner Sandy Praeger. Check with your state department of insurance. Then make sure to get referrals and ask each agent some questions.
"Ask them to explain the policy," Okumura says. "Ask what value they're going to bring to the table. How will they help you?"
Obviously, don't chose an insurance agent that *won't* answer your questions.
4. Not knowing your policy
A consumer's biggest mistake is not knowing what's in the fine print of a policy, says Etti Baranoff, an associate professor of insurance and finance at Virginia Commonwealth University. Many people don't know what their deductibles are and don't realize what's not covered until disaster strikes.
She says consumers need to talk to their agents to find out what's not covered and do an evaluation each year. Think about it. Would you buy groceries without knowing what is in your bag?
5. Not buying enough of certain important insurance products
Don't skimp on health insurance no matter how robust you feel today. We are all human which means eventually we get older and at some time or another we get sick. Finding a way to at least have catastrophic health insurance, I think, is really important so you don't just go into such medical debt that you never can dig your way out.
Also, consider getting life insurance if you have dependents. It can help pay the bills after a working parent dies unexpectedly. Any rational person recommends buying it when you're young and healthy -- it's much cheaper and easier to obtain when you don't have a chronic disease.