For most of us, insurance is not the most exciting topic in the world. It probably ranks up there with getting a tooth pulled out at the dentist and underwater basket weaving. (Okay, I know I am exaggerating a little bit, and I hope I didn’t offend any underwater basket weavers.)

The point is that most of us are not that interested in learning more about how to choose a proper insurance policy. Nevertheless, it is important for us to take the time to learn a little bit about how to reduce our risk of suffering catastrophic losses by purchasing adequate car insurance, home insurance, and other types of insurance.

There are three important points you need to realize when choosing a policy.

1. First of all, most people make the mistake of purchasing a policy solely on price without looking at the benefits and the disadvantages of each particular policy. Remember the old adage, “you get what you pay for.” Be aware that many policies will have a number of exclusions that you are not aware of, and this brings us to our second major point.

2. Most people have significant gaps in their insurance policies and are not even aware of them. If this happens to you, and if you find yourself in the unfortunate situation of having to file a claim, you may be shocked to learn that this particular type of loss was not protected by your insurance policy. These are the kinds of things you need to figure out beforehand so you can reduce your exposure to financial loss.

3. The last major point I would like to make is that you can often improve your insurance coverage at a surprisingly low rate. Sometimes adding $20 or $50 per year can increase your coverage significantly! Takes time to discuss things thoroughly with your insurance agent to make sure that you’re adequately protected in case you suffer a car accident or receive extensive damage to your house due to a storm.