Buying insurance can be a confusing process if you don’t do your research. It’s important to make sure that you buy the right type of insurance for your needs, but not only that- equally as important is the amount of insurance cover that you get.
Being underinsured can be financially crippling. Fortunately the days of only relying on insurance brokers are gone. Nowadays you can make sure that you have enough insurance cover by doing the necessary research.
What you can do to be careful not to be underinsured:
Keep in mind that if you are only insured for an amount that is less than the replacement value, then you are underinsured.
If you are self-employed, it may help to get disability insurance. Consider lump sum benefits for use as income replacement.
If you are insuring the contents in your home you need to make sure that you have the correct value of all your items. Create a contents list and be careful not to undervalue or underinsure your contents. Insurers may ask you to prove ownership and the value of the items that you claim for. Don’t assume that all insurance policies are created equal. Read carefully about how the company will determine the “amount of loss” or how they will assess your home content’s value.
Make sure that you read your insurance policy wording and that you understand it fully before signing any agreements.
By getting an insurance quote you are able to work out how much you will need to pay on a monthly, quarterly or annual basis for your insurance needs.
What happens if you are underinsured?
If you’re underinsured, the insurer, instead of paying out the full value of your claim, will pay out only a partial amount.