Home Insurance Mistakes You Can Totally Avoid
Home insurance can be complex. Often, it can be difficult to fully comprehend without some background knowledge. It’s little wonder so many folks often look to a broker to explain what their insurance actually covers.
Let’s have a look at some of the most common home insurance mistakes so you can better understand your coverage and avoid confusion when it’s time to file a claim.
Assuming Floods Are Covered
Home insurance typically covers water damage related to something like a burst pipe, but it seldom pays claims for water coming into your house from an external source. This means most people need flood insurance. You can usually add our flood insurance endorsement to your policy.
Failing to Compare Offers
Homeowners insurance premiums can fluctuate from company to company. In fact, one insurance company may be too expensive one year, but affordable the next, so you want to compare rates when you shop for coverage.
Work with a broker and make sure you compare apples to apples. Price is important, but you only know if you’re getting a deal if you also check the coverage amounts and endorsements or add-ons. Otherwise, you may pick the lowest premium only to find out that you’re one of the 64 percent of homeowners who are underinsured.
Insuring Your Home for Market Value, Not Replacement Value
Confusing your home’s fair market value and its replacement cost is one of the most common homeowners’ insurance mistakes. The limits on your dwelling coverage should be the amount it would take to rebuild your home, not what someone would pay to buy it. A home’s market value can be higher or lower than its replacement cost, so it’s not an accurate reflection of what your insurance company needs to make you whole after a loss.
Your broker can explain how the insurance company calculates dwelling value. Most companies use a similar formula that looks at your home’s square footage, building materials, and other features as well as the construction costs based on your location. Understanding this calculation can help insure your home for the proper value.
Choosing Too High of a Deductible
You can save money on your home insurance if you choose a higher deductible. This increases your responsibility in a claim, and that ultimately saves the insurance company money. However, you want to be cautious if you go this route. Raising your deductible reduces your premium, but you also have to come up with that amount if you have a claim.
Before committing to a deductible, do the math on how much savings you’re really getting. At some point, the savings may not be worth it if you don’t have an emergency fund to pay for losses. One tip people use is to take the savings from a higher deductible and put that into an emergency fund to build that nest egg. But you have to be disciplined to do this.
Underestimating the Value of Personal Belongings
People often grossly underestimate the value of the contents of their home; some even do it on purpose in hopes of saving on their insurance. But think about that might cost you in a total loss. When you add up the value of everything inside your home, from electronics to appliances, clothing, and home goods, you could be looking at more than $100,000 in stuff.
One way to get a better handle on what your personal belongings are worth is to conduct a home inventory. Use a checklist to properly record and categorize your stuff, and then store a copy away from your home so you can access it if there’s a catastrophe. You’ll be glad you have a complete list of lost items that includes serial numbers and receipts.
Keeping the Minimum Liability Coverage
The default limit for liability coverage in a homeowners insurance policy may be enough for some people. But others may have a greater risk of being sued and might want to consider increasing their liability coverage. There is no requirement or law that says how much coverage you need; it’s up to you to determine what’s appropriate for you. More importantly, increasing your liability coverage won’t dramatically increase your premium.
Forgetting to Notify Your Insurer of Major Changes
Certain changes in your home life merit a call to your insurance representative because they impact your coverage. For example, let your insurer know if you:
- Get married or ask someone to move in.
- Get a dog on a restricted breed list.
- Remodel your kitchen.
- Add a second bedroom.
Changes like these can mean you need additional coverage, and if you don’t notify your insurance carrier you risk having a claim denied because the new detail wasn’t part of the original coverage. Don’t feel like you’re burdening your broker with phone calls. They need to know and appreciate the heads up.
Thinking Home Insurance Covers Maintenance Issues
As a homeowner, you’re responsible for maintaining your home. That includes issues that might cause damage if you ignore them. like getting a new roof when necessary or dealing with pests. If you don’t take care of these kinds of problems, your insurance may deny a claim for any resulting damages.
For example, let’s say the railing on your staircase has rotted, and gives away when your neighbor grabs it. While your homeowners’ insurance usually covers a visitor’s injuries, it could deny this claim because you failed to take care of the railing.
Once you know the basics, getting homeowners insurance is pretty easy. But if you still have questions, our brokers and CSRs at DPM Insurance Group are also ready to help.
Source: Kin Insurance