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10 mistakes to avoid when shopping for auto and home insurance

The biggest mistake you can make when shopping for auto or home insurance? Being oblivious about your premiums.

Up to 60 percent of consumers never have shopped for better rates, says Robert Hunter, director of insurance at the nonprofit Consumer Federation of America. And 20 percent to 30 percent haven't compared rates in five years.

“An awful lot of people are insured by high-priced companies. They can save a lot of money if they shop around," Hunter says.

Here are nine other mistakes to avoid when shopping for auto and home insurance.

1. You don't show the agent who's boss.

If you use an agent who handles products from a variety of insurers, don’t assume you don’t need to shop around. The agent might steer you to one company based on his commission rather than what's the best value or policy for you.

Let the agent know that you’re also shopping around – that way, you’ll get the best deal, Hunter says. auto-home-insurance-mistakes

2. You think price and quality are linked.

Some of the best-rated insurance companies, including USAA and Amica, offer some of the best rates, according to Hunter. Consult your state insurance department's buying guide or the National Association of Insurance Commissioners website to get a sense of what your coverage should cost.

“It's a huge mistake to think high-priced means better quality,” Hunter says.

3. You focus only on price.

The cheapest auto or home policy may end up costing you more in the long run if it doesn't offer the same kind of coverage as a higher-priced offer, according to Michael Barry, a spokesman for the nonprofit Insurance Information Institute.

“When you get a price quote, you want to make sure you're looking at policies that have the same level of coverage, so when you hear a premium number, you're getting an apples-to-apples comparison,” Barry says.

4. You fail to bundle.

It's usually more expensive to insure your car and home with two insurers, rather than insuring them with one company. “You can get a substantial discount for bundling the policies with one insurer,” Barry says.

5. You lie.

Don't mislead your agent about key aspects of your auto insurance policy in hopes of getting a better rate, says Sonja Larkin-Thorne, consumer representative for the National Association of Insurance Commissioners.

On the auto side, some consumers “forget” to mention young licensed drivers in their household, as well as previous accidents or traffic tickets. Others might not be forthcoming about the miles they drive to work and the total number of miles they drive each year, according to Larkin-Thorne.

6. You neglect comprehensive and collision coverage.

Although comprehensive auto coverage is optional, it's usually worth the small extra cost, because it covers theft, as well as a range of other mishaps, including damage from flooding or a tree falling on a car, Barry says.

Collision, which pays for repairs to your vehicle if it's damaged in an accident, may not make financial sense for an older model, whose Kelley Blue Book value may not justify the cost.

“If your car is 10 years old, you probably don't want to carry collision,” Barry says.

7. You don't do your homework.

Homebuyers, especially first-time purchasers, can streamline the insurance process if they share with their insurers key information, such as construction type, age of dwelling, roof age and type, distance to the nearest fire station and whether there have fine jewelry or art to cover, according to Larkin-Thorne.

“I always say to consumers, 'Your beginning is your end,'” Larkin-Thorne says. “If you don't get the policy started with the right replacement cost and endorsements (add-ons), you will never have the right amount of insurance to protect you from a loss.”

Some home insurance policies cover the replacement cost of a house, while others cover only the market value.

8. You don't understand flood insurance.

Homeowner’s policies protect against wind damage, but not damage covered by flooding, unless you have separate flood coverage, Barry says. Even if your house sits outside a designated flood zone, you may want to add such insurance, which typically is sold through the National Flood Insurance Program. The coverage protects against damage to your home and loss of contents from flooding.

The program's website, Floodsmart.gov, offers a search engine where you can plug in your ZIP code to determine the flood risk in your community, Barry says.

9. You put too much stock in complaints.

Don't dismiss an insurer because the company simply has complaints filed against it, Barry says. The real criteria when researching insurers through such avenues as J.D. Power and Associates or a state insurance department is whether complaints filed against a company were upheld.

“You want to look at when regulators came in and said the insurance company was wrong and consumers were right,” Barry says.

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