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Published: June 27, 2018

The adage better safe than sorry might as well be the average insurer’s maiden name. However, that doesn’t make it any less real or any less present in our minds. Insurance companies know this and prey on our fears to cow us into buying more coverage than we need.

I’m not exactly saying “beware” of the big bad wolf, but it won’t hurt to revise the fine print on a few critical aspects of your coverage. Doing so might help you determine whether you’ve got all the insurance you need or wasting your money on the details. Here are some of the top insurance policies where we tend to take on too much coverage.

1. Homeowner’s Insurance

The idea here is that most of us are matching our coverage to our property’s market value. But this isn’t by any means an accurate estimator of your home’s actual value. For example, you might buy property in an area where land values are high. However, the cost of rebuilding the house itself can be lower than the purchase price.

Have someone calculate precisely how much it would cost to rebuild your home. Or run the numbers yourself if you’ve got the time. Do some homework, and you’ll likely find you’re getting different quotes from different insurers. If you see your coverage is higher than the cost of rebuilding, then you and your broker need to sit down for a chat.

As an alternative, you can also try to increase your deductibles. And yes, if something were to happen, you’ll have to pay a little more. But unless your home is sitting right on the Florida Keys coast, you might do better with a lower premium and a higher cash flow.

2. Term Life Insurance

Yes, you can have too much life insurance. To start, take into account a few things: you and your partner’s age for one, and the age of your children—how long will they need your financial support? Also, consider any mortgage and debts you have and make sure to include them in your life insurance plan. There’s also college expenses, and as morbid as it seems, funeral costs.

The average rule of thumb is to get coverage for eight to ten times your income. Keep in mind this number goes up or down depending on when you plan to retire. All-in-all, be sure that you don’t have more coverage than necessary.

3. Credit Insurance

To put it lightly: borderline fraud. Credit insurance is by far one of the most unnecessary insurance policies out there. If you are currently plagued by it, then you know how it works. Lenders will offer an overpriced, insurance to cover your loan or credit debt. Urged by the fear that we might pass our debt onto to our family or spouse, a lot of us end up taking the deal. Don’t.

For this bane of an insurance, we recommend cutting it out all together like the malignant tumor it is. Anyhow, good term life insurance should help cover this sort of debt issue.

4. Auto Insurance

While we do recommend getting comprehensive auto insurance policy, we also recommend reading the fine print. Auto insurance lenders tend to tack on some unnecessary coverages onto our policy. The result is too much auto insurance on things you won’t need.

Start by getting rid of inessential coverage, like accidental medical (this is what medical insurance is for) and automobile collision. If you’ve got an old car with a value below $5000, and you can afford minor out of pocket repairs, you won’t need this coverage.

For new vehicle owners, we recommend keeping your deductible at no less than $1000. The average price for full collision will usually fatten your premium. If you don’t plan on covering your car with dents, you should be safe. Also, go ahead and get rid of towing.

5. Too Many Insurers

While this isn’t precisely a policy, having too much insurance from too many insurers is another way most of us spend too much on insurance. Our first suggestion is to shop around, always. We’re not saying you should jump ship every six months, as insurers will see this, but keep an eye out for better premiums.

Lastly, most insurance companies will offer varying discounts for bundling your insurance policies. While it may take some extra homework to get the best deal possible, you’ll save money, time and paperwork.

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