Top 10 Mistakes People Make When Buying Insurance and How to Avoid Them
By Rozmek Team
•
September 25, 2025
Buying insurance can be a tricky process, and it's easy to make mistakes that can cost you later. The good news is that the most common errors are also the most avoidable. Here are the top 10 mistakes people make and how to steer clear of them.
Top 10 Insurance-Buying Mistakes ????
Only Shopping for the Lowest Price
The Mistake: Choosing a policy just because it's the cheapest, without checking if the coverage is actually adequate for your needs. A low price can often mean high deductibles and huge gaps in your protection.
How to Avoid It: Focus on value, not just price. Compare what you're getting for your money. A slightly more expensive policy from a reputable company with better coverage is almost always the smarter long-term choice.
Underinsuring Your Assets
The Mistake: Not buying enough coverage to fully protect your home or replace your income. A classic example in the U.S. is insuring a home for its real estate market value instead of its (often higher) rebuild cost.
How to Avoid It: For homeowners insurance, get a specific rebuild cost estimate. For life insurance, a good rule of thumb is to get a policy worth 10 to 12 times your annual income.
Choosing a Deductible That's Too High
The Mistake: Picking a huge deductible to get a lower monthly premium, but not having enough cash in savings to actually pay it if you need to file a claim.
How to Avoid It: Set your deductible to the highest amount you could comfortably pay out of your emergency fund tomorrow without causing financial stress.
Not Shopping Around
The Mistake: Accepting the first quote you get or blindly renewing with your current company every year. Loyalty doesn't always pay when it comes to insurance.
How to Avoid It: Get at least three quotes from different insurance companies before buying or renewing a policy. Rates for the exact same coverage can vary by hundreds of dollars.
Lying (or Omitting Info) on Your Application
The Mistake: Not disclosing a health condition on a life insurance application or failing to mention that you use your car for a delivery side-hustle.
How to Avoid It: Be 100% honest. If the insurer discovers you misrepresented information, they have the right to deny your claim or cancel your policy entirely. It's never worth the risk.
Ignoring the Exclusions
The Mistake: Assuming your policy is a magic shield that covers everything. Many people are shocked to find out what's not covered when it's too late.
How to Avoid It: When you get your policy, find the "Exclusions" section and read it carefully. For example, know that flood and earthquake damage are not covered by standard homeowners policies in the U.S.
Buying Based on a Friend's Advice
The Mistake: Getting the same auto or life insurance policy as your friend, even though your cars, income, and family situations are completely different.
How to Avoid It: Remember that insurance is personal. Your needs are unique. Do your own assessment instead of copying someone else's plan.
Setting It and Forgetting It
The Mistake: Not reviewing your policies for years at a time, even after major life events have changed your needs.
How to Avoid It: Do a quick insurance check-up at least once a year or after any big life change, like getting married, having a baby, buying a home, or getting a significant raise.
Misunderstanding Liability Coverage
The Mistake: Opting for the state-minimum liability on your auto or home insurance. These minimums are often dangerously low and wouldn't come close to covering costs in a serious accident.
How to Avoid It: Protect your assets by choosing higher liability limits. Many financial advisors recommend an umbrella policy for an extra layer of protection.
Not Asking Questions
The Mistake: Feeling too intimidated or rushed to ask your agent to clarify something you don't understand in the policy.
How to Avoid It: It's your money and your protection! There are no dumb questions. Ask your agent to explain any term or condition in plain English until you're confident you understand it.
Top 10 Insurance-Buying Mistakes ????
Only Shopping for the Lowest Price
The Mistake: Choosing a policy just because it's the cheapest, without checking if the coverage is actually adequate for your needs. A low price can often mean high deductibles and huge gaps in your protection.
How to Avoid It: Focus on value, not just price. Compare what you're getting for your money. A slightly more expensive policy from a reputable company with better coverage is almost always the smarter long-term choice.
Underinsuring Your Assets
The Mistake: Not buying enough coverage to fully protect your home or replace your income. A classic example in the U.S. is insuring a home for its real estate market value instead of its (often higher) rebuild cost.
How to Avoid It: For homeowners insurance, get a specific rebuild cost estimate. For life insurance, a good rule of thumb is to get a policy worth 10 to 12 times your annual income.
Choosing a Deductible That's Too High
The Mistake: Picking a huge deductible to get a lower monthly premium, but not having enough cash in savings to actually pay it if you need to file a claim.
How to Avoid It: Set your deductible to the highest amount you could comfortably pay out of your emergency fund tomorrow without causing financial stress.
Not Shopping Around
The Mistake: Accepting the first quote you get or blindly renewing with your current company every year. Loyalty doesn't always pay when it comes to insurance.
How to Avoid It: Get at least three quotes from different insurance companies before buying or renewing a policy. Rates for the exact same coverage can vary by hundreds of dollars.
Lying (or Omitting Info) on Your Application
The Mistake: Not disclosing a health condition on a life insurance application or failing to mention that you use your car for a delivery side-hustle.
How to Avoid It: Be 100% honest. If the insurer discovers you misrepresented information, they have the right to deny your claim or cancel your policy entirely. It's never worth the risk.
Ignoring the Exclusions
The Mistake: Assuming your policy is a magic shield that covers everything. Many people are shocked to find out what's not covered when it's too late.
How to Avoid It: When you get your policy, find the "Exclusions" section and read it carefully. For example, know that flood and earthquake damage are not covered by standard homeowners policies in the U.S.
Buying Based on a Friend's Advice
The Mistake: Getting the same auto or life insurance policy as your friend, even though your cars, income, and family situations are completely different.
How to Avoid It: Remember that insurance is personal. Your needs are unique. Do your own assessment instead of copying someone else's plan.
Setting It and Forgetting It
The Mistake: Not reviewing your policies for years at a time, even after major life events have changed your needs.
How to Avoid It: Do a quick insurance check-up at least once a year or after any big life change, like getting married, having a baby, buying a home, or getting a significant raise.
Misunderstanding Liability Coverage
The Mistake: Opting for the state-minimum liability on your auto or home insurance. These minimums are often dangerously low and wouldn't come close to covering costs in a serious accident.
How to Avoid It: Protect your assets by choosing higher liability limits. Many financial advisors recommend an umbrella policy for an extra layer of protection.
Not Asking Questions
The Mistake: Feeling too intimidated or rushed to ask your agent to clarify something you don't understand in the policy.
How to Avoid It: It's your money and your protection! There are no dumb questions. Ask your agent to explain any term or condition in plain English until you're confident you understand it.