Learn how to avoid common mistakes when purchasing homeowners insurance
Not all insurance is the same. Even policies that look the same on the surface may not give the homeowner the coverage they truly need. Wading through the sea of words in the policy can be frustrating and time-consuming.
While everyone knows they need homeowners insurance, it is not always clear what they need, or for how much they should insure their home against loss or damage. Here are five common mistakes homeowners make when purchasing insurance and how to avoid them.
1. Do not underinsure your home
There are several dollar amounts homeowners look at when insuring their homes. The first of those is what you owe the bank, and the second is the value of the home. Many homeowners will look at these values and stop there.
However, what you should keep in mind is that, should tragedy strike, you will be looking to not only rebuild your home but replace all your possessions, as well. This number is likely much higher than the value of your home or the loan amount.
Rebuilding your home will likely cost more than what you’d sell it for. If your home is destroyed, chances are you have also lost some, if not all, of your possessions. From clothes to appliances, you will be looking to replace everything.
Also consider, if it were a widespread natural disaster, such as a hurricane, building costs might increase because of supply chain issues and higher demand in your area.
2. Know where to set your deductible
Where to set the deductible may seem cut and dry. But that is not always the case. A high deductible may make your insurance premium more affordable. However, in the long run, if something should happen to your home, you will need to be able to cover that high deductible somehow.
Do you have access to that amount of money, should you need to use your insurance? Another thing to consider is that smaller damage, such as a tree falling on the roof, may not add up to your deductible, meaning the homeowner would shoulder those repairs.
Setting a deductible too low can cause you to pay much higher premiums for your insurance. This creates a situation called being “insurance poor,” where you pay higher premiums but have access to a larger amount of money if you need to make a claim.
3. Do not overestimate homeowners insurance coverage
One common mistake homeowners make when purchasing homeowners insurance is to either overestimate or underestimate coverage, which is easy to do.
You may assume fire is covered and be correct. You may assume flooding is covered, or sewage backing up into your basement is covered, but it may not be.
In the case of flooding, you must have flood insurance to be covered. Your insurance agent will play a vital role in ensuring your home is covered for any natural disasters such as floods or earthquakes.
A typical, basic homeowners policy will not cover floods, earthquakes, or hurricanes. While you may not believe your home is likely to flood, your homeowners insurance agent will have a good feel for the most common claims made in your area.
4. Legal liability limits on homeowners insurance may not be enough
Most states require a specific amount of liability insurance tied to a homeowners policy. This amount may be correct in some instances, but not in all and likely not in most situations.
When purchasing a homeowners’ insurance policy, look at the liability limits and know what would be covered if someone gets hurt on your property. Talk with your insurance agent regarding your needs.
When purchasing homeowners insurance, it is always best to meet an insurance agent face-to-face and have a conversation about your needs and how to best fill them in the most economical way. This leads directly to the fifth common mistake people make when purchasing homeowners’ insurance.
5. Do not choose insurance based solely on price
When it comes to homeowners insurance, talk around the water cooler at the office always seems to revolve around price – that is, until someone needs to file a claim. Then the conversation changes.
It revolves around the process and how quickly the homeowner was able to get back on their feet and resume a somewhat normal life again after a fire or their home being destroyed by a hurricane. Those experiences tell more about an insurance company than the dollar amount you write on the check twice per year to pay the premiums.
While you may find two policies with similar coverages and different prices, be sure the less expensive policy isn’t cheaper because it cuts corners on coverages that may be important to you.
This is where it is important to talk with a homeowners insurance agent who will listen and understand your and your family’s needs.
Sitting down with an insurance agent when purchasing homeowners’ insurance also gives you the opportunity to investigate bundling home and auto insurance, or any other types of insurance you may have. This will often save you money as well. Research homeowners insurance companies and check around for an insurance agent with whom you can build a relationship.
At Avante, we do not expect you to know all the ins and outs of insurance, but we can look at your unique situation and provide the homeowners insurance you need to protect you and your family. Let us help you avoid these common mistakes and more when purchasing homeowners’ insurance. Get in touch for a consultation today.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.