You’re kind and charitable. You always say “please” and “thank you,” and you make it a point to recycle. You never hesitate to help a friend in need, and you even attend services at your church, synagogue or mosque regularly.
But are you making a deal with the devil when it comes to your homeowner and car insurance policies and premiums?
Following are seven deadly — and somewhat common — insurance sins. The moral, according to Carole Walker, executive director of the Rocky Mountain Insurance Information Association, is “know the insurance costs before you sell your soul.”
Read on to learn if you are guilty of insurance debauchery.
Have you ever considered buying a fancy new set of wheels or a bigger, better home to keep up with the Joneses? Envy can have a serious impact on your insurance premiums.
“When you’re making emotional financial decisions, it’s easy to forget about the underlying insurance costs,” says Walker.
Remember, insuring a larger, more expensive home is likely to be a lot more costly than insuring a more humble abode.
“You need to ask yourself, what would it cost to rebuild my current home in its current location?” says Michael Barry, spokesperson for the Insurance Information Institute.
Trying to impress your friends by sprinkling expensive possessions throughout your home also carries a home insurance cost, Barry says. Walker agrees.
“Lifestyle envy will also result in more expensive ‘stuff’ that costs more to insure, along with pricey items — art, jewelry, antiques, electronics — that need extra insurance endorsements.” says Walker.
And of course, don’t forget how “automobile envy” can boost your costs.
“That sports car parked out front will be insured based in part on increased repair costs, so comprehensive and collision coverage will be more expensive,” Walker says. “Liability costs may also go up depending on factors like crash safety ratings.”
It’s true that auto insurance rates tend to increase in line with surging horsepower. For example, the Porsche 911 Carrera GT2 coupe is among the most expensive cars to insure among 2010 models. A 40-year-old man would typically pay a national average of $2,943 for car insurance annually, and that’s assuming the driver had a good driving record.
Gluttony not only thickens you waistline — it also can inflate your health and life insurance payments.
If you eat large amounts of unhealthy food and get little to no exercise, your health is bound to suffer. This, in turn, may affect your health insurance rates or even your ability to obtain health insurance altogether. At the very least, you will probably require more doctor visits, which means you’ll spend more money on co-payments.
By contrast, trimming back on gluttony can actually cut your costs.
“Health insurers are now trying to address this proactively. If you join a gym and can prove to the health insurer that you have been going on a regular basis, many (insurers) will give you a cash bonus,” says Barry.
For example, the Fit Choices by Medica program provides a monthly $20 credit toward health club fees for members who meet attendance requirements.
Life insurance rates also may soar if you develop a medical condition as a result of your gluttonous eating habits.
“Almost every life insurer is going to ask a prospective policy holder to submit to a physical exam as part of the application process,” says Barry.
Barry says insurance companies ask the same questions of every applicant. Are you healthy? Do you have high blood pressure or a predisposition to diabetes?
“These are all rating factors,” he says.
If greed gets the best of you and you try to skimp on insurance, you might pay the price — literally. So think twice before hoarding money to the point of being underinsured.
“Cutting corners on insurance is one of the most costly decisions you can make,” Walker says.
She says falling victim to “short-term greed over long-term insurance needs” can put you at risk for having to pay out of pocket for medical bills and car and home repairs.
“What if you injure someone in a car accident or your dog bites someone? If you’re sued, could you defend yourself in court or recover financially without proper insurance?” she says.
Being underinsured is a common mistake, agrees Barry. Many people fail to report home improvements to their insurance company or opt out of uninsured and underinsured motorist coverage. That can be costly.
“People think that they’re saving money, but in the long-term, it’s a bad move,” he says.
Lusting after speedy cars, expensive “toys” like speed boats or an in-ground pool can also cause your insurance costs to skyrocket or require you to purchase an insurance rider or an extra insurance policy.
Items such as “in-ground pools and trampolines can certainly add to a homeowner’s insurance policy because you’ve got a big liability,” Barry says. That increased risk may require you to buy extra liability coverage, such as an umbrella policy, which provides additional liability coverage above the limits of your homeowners, auto, and boat insurance policies. It kicks in when the liability on these other policies has been exhausted.
Taking pride in your low insurance rates and boasting about how you have the best insurance company can keep you from shopping around and acquiring even lower rates.
“Pride in your insurance company may be well-deserved, but if you are trying to save money, it’s always a good idea to shop around,” says Walker.
Compare rates from various companies “particularly if you have a life change — new marriage, new teen driver, improved credit — these are factors that could affect your premium and may be good times to shop your policy,” she says.
Also, if you’re healthy and have term life insurance, once the term is up, you may save money by shopping around. In some cases healthy individuals can get a lower rate by reapplying for a new policy rather than automatically renewing their existing one.
However, both Walker and Barry emphasize that you shouldn’t trade price for good customer service and a reputable insurance company.
Being lazy about making your insurance payments could lead to cancellation.
“Excuses won’t pay the bills if you let your insurance lapse and it results in policy cancellation, particularly if you get in an accident or you have a house fire without coverage in place,” says Walker.
A lapse in your auto insurance coverage can lead to much higher rates, according to an Insurance.com analysis of car insurance policies sold.
Remember that your mortgage lender also will require you to carry insurance on your home. Fail to do so, and you likely will pay.
“You definitely don’t want to find yourself in a situation where you are required to get forced place insurance,” says Barry.
This type of insurance protects the lender, not the homeowner. However, the homeowner is responsible for paying the premiums, which typically are much more expensive than the cost of standard home insurance.
Tailgating that annoying driver or inflating claims to “get back” at your insurance company may seem like good ideas. But they could cost you in the long run.
Road rage that leads to aggressive driving is unlikely to benefit you in any way.
“That risky behavior can easily result in pricey tickets, higher insurance premiums and even jail time,” Walker says.
Walker also urges you to resist the temptation to strike back at your insurance company for charging you what you view as excessive premiums. She says that “if you see dollar signs from a torched car or burned home or business” and illegally pad a claim, you are committing insurance fraud.
“That crime will land you in legal trouble at least, and at most prison,” says Walker.