It would seem like an obvious choice to purchase the best and most comprehensive insurance coverage possible for an investment as significant as a home. After all, it is typically one of the most valuable assets people own. Yet, many make enormous mistakes where their homeowner’s insurance is concerned. In this article, we’ll take some time to look at the worst of these mistakes and discover how to avoid them:
- Underinsuring the property – It is interesting to consider the typical knee-jerk reaction of most consumers, and particularly where insurance is concerned. After all, almost everyone wants the least expensive purchase price available, and yet, inadequate coverage can translate to thousands of dollars of uncovered losses and/or damages to the property. Just consider that coverage should be in line with the current market. If your home was purchased for $180k, but the current market pegs it at $220k, if you don’t get it appropriately covered, and it is destroyed, you will not have enough to rebuild. The same goes for the contents, and you should always place “higher limits on more expensive items such as engagement rings, cameras, computers and expensive antiques. It’s good to get these items appraised for their true worth and adjust limits accordingly.”
- Deductibles as percentages – Many homeowners think of their deductibles as fixed amounts, but they can also be a percentage of the coverage amount. This would mean that the deductible could be thousands of dollars rather than an anticipated figure like $1k.
- Flood insurance – Though many know that flood insurance is not a given, just as many assume it is part of their plan. Because flooding can happen anywhere, it is imperative to ask your provider for a quote that includes the amount needed to have coverage for flooding. The good news is that there are low-risk zones and if your property is within one, you will have a lesser premium.
- Other risky assumptions – In addition to assuming flooding is covered, many also think things like earthquakes, mold and even sewage backup are covered. The sad news is that, for the most part, they are not. You’ll need to discuss this with your agent to learn how much it will cost to get coverage for such unpredictable issues.
- A poorly chosen deductible – Most homeowners develop a monthly budget and do things like setting aside savings or working on goals. Part of this budgeting is to include insurance premiums, and yet most fail to consider how the deductible will play out. For example, you might opt for a low deductible we don’t pay a tremendous amount out of pocket when something occurs, and the higher deductible means paying more but saving on premiums. Yet, do you have the deductible on hand? Whether it is $500 or $5000, you’ll need to consider that as part of the budget and have it set aside in the event it is required.
These are but a few of the mistakes made by homeowners buying insurance. By working with a knowledgeable insurance professional, such as the team at Netquote, it is possible to tackle all of the big questions and make no mistakes with your insurance plans.