Your home purchase is likely the biggest investment you will make, and you want to protect it and your personal belongings. Shopping around for the best homeowners insurance quotes is a great place to start when considering home insurance, but the amount of coverage you get may depend on your location, the cost to rebuild your dwelling, the value of its contents, and your budget.
According to a recent study from realtor.com, only 56% of homeowners know what to look for in an insurance policy. To help you save money while getting the best protection from your insurance agent, follow these tips to avoid common home insurance mistakes.
Choosing an Insurance Company Based on Their Price
While choosing a homeowners insurance company with competitive rates is important, you also want to know if the insurer is fiscally sound and provides good customer service. Also, make sure you compare the coverage amounts, endorsements, and add-ons when shopping around for an insurance company so you don’t end up being underinsured.
You can check the financial health of an insurance company with independent rating agencies such as A.M. Best. Ask your friends, relatives, and colleagues about their experiences with different home insurance companies, so you pick a company that responds to your needs while handling insurance claims efficiently.
Setting Too Low a Deductible
As a new homeowner, you are likely hemorrhaging money and trying to cut corners wherever you can. But setting too low a deductible means higher insurance premiums. A premium is a monthly or annual fee you pay to your insurance company for protection. A deductible is an out-of-pocket fee you pay every time you file a claim.
Unless you live in an area with frequent natural disasters or an older home, consider a higher deductible, so your premiums are more affordable.
If you have a tight budget, set aside the money you save monthly on your premiums to ensure you can meet higher out-of-pocket expenses if you have to file a claim.
Insuring Your Home for Market Value Instead of the Cost of Rebuilding
Home insurance is designed to cover the cost of rebuilding your home and not the sale price. Reducing your coverage when your home’s value drops may not cover the replacement cost of rebuilding and buying new belongings at today’s prices.
Underinsuring your home can be a costly mistake, especially if you only have enough insurance to cover your mortgage payment.
Most insurance companies use a similar formula to calculate the dwelling value. This formula typically includes your home’s location, square footage, and the cost of building materials.
Assuming Floods are Covered
While home insurance covers damage due to a burst pipe, it does not cover damage from broken sump pumps, storm surges, and flash flooding. To ensure you are covered, you need to add an insurance endorsement to your policy.
An endorsement is an amendment to your existing insurance coverage. You can add an endorsement to your policy mid-term or at renewal. Typical endorsements include adding additional coverage such as sewer backup protection.
Underestimating the Value of Your Personal Belongings
Most people underestimate the value of the contents in their home, so in the case of a fire or other disaster, they will be paying out of pocket to replace their personal belongings.
To ensure this doesn’t happen to you, conduct a home inventory to record and categorize your belongings. If possible, save your receipts as proof of purchase.
Consider adding a personal property floater to your policy for high-value items like jewelry, furs, and art.
Forgetting to Let Your Insurer Know When You Make Modifications
When you are making modifications to your home, big or small, it’s critical to let your insurer know ahead of time. Renovations and remodeling open your house up to a new level of risk that is not otherwise present. Failing to notify your insurer of this change can result in your home insurance policy being voided.
If damage occurs during your modification project and your insurer wasn’t made aware the changes were taking place, you may end up paying for repairs out of pocket.
Not Bundling Your Home and Auto Insurance
Save significantly on your monthly premiums by bundling your home and auto insurance with a single provider. Many providers offer 10% to 25% lower premiums when combining your home and auto insurance than paying for each separately. This benefit is known as a multi-policy discount.
While you can often seek both forms of coverage through a single provider, some companies now offer multi-policy discounts for bundles between two companies. Metromile and Hippo advertise savings of up to 15% for bundling your home and auto insurance between the two providers.
Leaving Your Home Unattended While on Vacation
When you’re going away on a short vacation or an extended trip, consider whether you need to make arrangements to have someone check on your property while you’re gone.
If your home is empty for more than 30-days, you may need to acquire additional home insurance coverage from your provider. Vacant home coverage ensures your property is protected, even when you’re away for long periods.
Keeping the Minimum Liability Coverage
While the default liability coverage in a homeowners insurance policy of $100,000 is typically enough for most homeowners, it might not be enough for you. If you have a pool or host frequent parties, your chances of a lawsuit increase.
It’s up to you to determine the appropriate amount of coverage. Increasing your liability coverage won’t dramatically raise your premium.
Customize Your Coverage
Do your research before purchasing a policy to get reasonable rates on your home insurance and avoid common mistakes. Be vigilant about informing your insurance provider of plans for renovations, and don’t automatically choose the cheapest coverage or the lowest deductible because it could cost you more in the long run.
Finance is us is a valuable resource for all your insurance needs. Find out more about how to protect your home today.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.