We often hear from people who seem hell-bent on paying higher insurance rates or getting their policies canceled.
So in the interest of time we’ve compiled this step-by-step guide to bungling your coverage.
1. Don’t pay your premiums on time.
Let’s start off with possibly the shrewdest way to ruin your insurance prospects for 2015: Don’t pay your insurance bills. This strategy is particularly clever because it involves no action on your part whatsoever, and in fact opens up extra time for viewing “Dancing with the Stars” and updating your Facebook page.
When you don’t pay your premiums you’ll face cancellation or policy lapse, depending on the insurance type. For example, if you car insurance lapses you’ll be facing higher rates when you want to buy another policy.
Losing your life insurance coverage due to nonpayment would be especially inconvenient.
2. Don’t tell your life insurance beneficiaries what company has your policy.
Many people regularly employ this strategy, resulting in “lost” life insurance policies. Like nonpayment of premiums, it is sublime in its simplicity: If you don’t tell your beneficiaries who your life insurer is, they’ll have a heck of a time trying to dig through your files and old paperwork to find out. Or better yet, simply don’t tell them you have a policy at all, and leave them wondering what to do after your death.
If this has happened to you, here’s how to find lost life insurance policies.
3. Forget to take your ex-spouse off your life insurance policy.
Here’s a way to not only enrage your current spouse if you pass away but also muck up his or her finances: Don’t change your life insurance beneficiary after you remarry.
Too many people think that if their will names their current spouse as the heir, all assets will pass to their spouse as an “operation of law.”
4. Neglect to make a home inventory.
Many people live blissfully for years, even decades, without any sort of home inventory. But in the bad year when you have extensive house damage, lack of an inventory can cost you dearly.
If you have a large homeowners insurance claim – from a fire or tornado, for example – and have no home inventory, you’ll probably have a hard time reconstructing from memory a list of everything you owned. This ultimately means you won’t be able to receive reimbursement for everything to which you’re entitled. After all, you won’t make a claim for items you forgot you had.
5. Don’t bother to review your insurance policies every year.
Here, too, inertia is an easy pathway to insurance debacles. If you are ignorant of your current coverage limits, you may be underinsured.
6. Blow off open enrollment for health insurance.
Here’s a fun way to make your family furious at you: Forget to add or remove “dependents” from your health plan at open enrollment time. Open enrollment is your chance during the year to make changes like this. For example, say your daughter graduated from college and got a job with benefits – you’d want to drop her from your plan. Or maybe your daughter lost her job and needs insurance – you can add her until she’s age 26.
It’s also the time to change deductibles and other coverage options.
Some life events will make you eligible to make changes any time of year; for example, if you get married, you can add your wife to your health plan even if it’s not open enrollment time.
7. Have a baby but don’t add the little one to your health insurance plan within 30 days of birth.
Boy, babies are expensive. Why not add to the expense by paying all their health care out of your pocket? That’s what you’ll be doing if you don’t add your new child to your health plan within 30 days – or the deadline outlined by your plan. If you miss that window you’ll have to wait until your plan’s next open enrollment period to add the child as a “dependent.”
8. Get a DUI.
Drinking and driving can fast-track you to an insurance nightmare.
9. Buy a new car but don’t tell your insurance company.
While most car insurance companies will extend some form of automatic coverage for new vehicles, the time period is typically limited, says Eric Roethe, product research specialist with American Family Insurance.
“Make sure you don’t wait too long after bringing that shiny new car home before you give your agent a call,” he advises.
If you don’t, you’ll likely be driving without coverage within a few weeks.
10. Drive for Uber.
A personal automobile policy is designed to cover only the traditional uses of private passenger vehicles, Worters says. It is not designed to cover the commercial use of a vehicle – including making money via a ride-sharing service.
This exclusion extends beyond ride-sharing to any business use of a vehicle, such as delivering newspapers or using a pickup to plow snow.
11. Loan your car.
Trying to be Mr. Nice Guy by letting a friend borrow your car could wreck your rates. You’re responsible for what happens to and with your car.
“When you loan your car, you’re loaning your insurance, too,”
If your pal hits someone or something and is at-fault for the accident, the liability claim goes on your record and could cause a rate increase at renewal time. And if you don’t have collision coverage, your car damage isn’t covered at all.
12. Make claims for every little scratch and dent.
You pay good money for your insurance, so you might as well use it, right?
But here’s the rub: Actually using your insurance could bungle your rates. Your car insurance policy is not a car-maintenance policy, It’s intended to protect you from unforeseen accidents.
Definitely don’t bother to make a claim for damage that’s less than your deductible. And don’t pile up small claims, which could provoke a rate increase down the line.
Your deductible is what you agree to pay out of pocket when you use your insurance. In general, the higher you set your deductible, the less you’ll pay for your policy. And conversely, if you set your deductible low, you’ll pay more for your policy, but less when you have a claim.
