If you’ve ever felt you’re paying too much for coverage you don’t use—or discovered a painful gap right after a loss—you’re not alone. Advisors say most insurance pain points come from a short list of avoidable mistakes. Fix these, and you’ll spend smarter and sleep better.
Shopping on price alone, not on “total-year” value
A rock-bottom premium can be a trap if the deductible is sky-high, sub-limits are tight, or claims service is slow. Advisors price policies two ways:
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Sticker: the monthly premium.
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Total year: premium + your most likely out-of-pocket (deductibles, copays, exclusions).
Pro move: Get two or three quotes with the same limits and deductibles. Then run one scenario with a higher deductible to see if the savings justify the extra risk you’d take.
Assuming homeowners insurance covers floods
Standard home policies typically exclude flood. That’s a separate policy (often via NFIP), and flood risk isn’t just “coastlines”—about 40% of NFIP claims come from outside the high-risk zones, which surprises many new homeowners.
Why this hurts: After major storms, owners without flood policies discover their home insurance won’t pay, and federal aid (if any) rarely makes them whole. A recent explainer noted that only about 6% of U.S. households carry flood insurance, despite flooding being the most common natural disaster.
Pro move: Check your property’s flood exposure (historic events, local drainage, updated maps) and price an NFIP or private-market flood quote even if you’re “outside the zone.”
Ignoring the appeals process after a health claim denial
Denials are common—and often fixable. In 2023, insurers on HealthCare.gov denied 19% of in-network claims. Many denials stem from coding issues or missing documents, not a true lack of coverage.
Pro move: Always request the written Explanation of Benefits (EOB), ask your doctor’s office to correct codes, attach a short medical-necessity letter, and submit an internal appeal on time. If that fails, escalate to an external review where available.
Overlooking the ambulance loophole
The No Surprises Act curbed many surprise medical bills—but ground ambulances remain a big gap. Historically, about half of emergency ground ambulance rides produced out-of-network charges for the privately insured.
Pro move: If you’re billed out-of-network, appeal. Ask your plan whether a negotiated rate or state-level protections apply. Keep the itemized bill and run it through your insurer’s dispute channel.
Underinsuring natural-catastrophe risk
The “protection gap” is real: in 2024, only 43% of global disaster losses were insured—the rest fell on households and governments.
Pro move: In wildfire, storm, or quake zones, confirm you have the right peril coverage (e.g., named-storm or windstorm deductibles, wildfire mitigation credits, earthquake or flood add-ons). Ask your agent to model a realistic “bad year” cash flow before you set deductibles.
Letting life changes get ahead of your policy
New baby, business, mortgage, or divorce? Your coverage needs just changed. Studies tracking household coverage show ongoing gaps—e.g., large shares of women report underinsurance on life cover—signaling that many families don’t revisit policies after milestones.
Pro move: Calendar a 30-minute annual review. Update beneficiaries, riders, business endorsements, and personal-property schedules (jewelry, cameras, instruments).
Treating telematics and smart-home devices as “nice to have”
Usage-based auto programs can reduce premiums for lighter/safer drivers. Water-leak sensors and automatic shutoff valves prevent four-figure repairs (and can unlock carrier discounts). Ask which devices your insurer recognizes and what data they collect.
Pro move: Choose down-only telematics programs (can lower but not raise your rate) and keep receipts/photos for any smart-home installations to secure the discount.
Setting deductibles without an emergency fund
A higher deductible lowers premiums—but only makes sense if you can comfortably cover it. Otherwise you’ll delay repairs or put the bill on high-interest credit.
Pro move: Build (or top up) a 3–6-month emergency fund before raising deductibles.
Not documenting the easy stuff (which later proves everything)
Half of the “claim friction” advisors see boils down to paperwork: missing itemized invoices, unclear ownership, no photos. That’s fixable in advance.
Pro move: Keep a one-folder system: policy docs, appraisals, photos, serial numbers, videos of each room (walk-through once a year), and a simple call log (date, name, summary).
Forgetting about identity and medical-ID theft
If someone uses your identity for care, their records can “merge” with yours—complicating treatment and benefits. The FTC warns that medical ID theft can affect what your plan will cover and even your credit. Identity-theft reports remain elevated across categories.
Pro move: Create online accounts with your insurer and patient portals (claim and EOB alerts), freeze credit files, and keep a list of your benefits so you can spot bogus activity fast.
One-Page Advisor Checklist: Fix the Big Leaks First
| Mistake to avoid | Why it’s costly | Five-minute fix |
|---|---|---|
| Buying by price, not value | Low premiums + high out-of-pocket later | Compare “total year” cost on 2–3 like-for-like quotes |
| Assuming flood is covered | Standard home policies exclude flood | Price NFIP/private flood even “outside the zone” |
| Dropping a denied claim | Many denials are admin errors | Get EOB, correct codes, file appeal on time |
| Ambulance surprise bills | Ground rides often out-of-network | Appeal; check state protections |
| Underinsuring catastrophes | Large share of global losses uninsured | Check wind/wildfire/quakes; set realistic deductibles |
| Skipping life-event updates | Gaps grow quietly (new baby/home/business) | Annual 30-minute coverage review; update beneficiaries |
| No documentation | Slows or sinks claims | Annual video walk-through + itemized receipts |
| High deductibles, low savings | Cash crunch at claim time | Build emergency fund before raising deductibles |
| Ignoring ID theft risk | Can alter records and benefits | Freeze credit, enable EOB alerts, review claims |
A quick word on context and costs
Premiums react to inflation with a lag—so plan for line-by-line changes at renewal (life, P&C, health). That makes the annual “coverage audit” worth doing every single year, not just when something goes wrong.
Bottom line
Buy for the risks you actually face, document the things you couldn’t easily afford to replace, and keep your file clean and current. Do those three habits well and you’ll avoid the industry’s most expensive mistakes—without overspending on noise you’ll never use.