Buying Home Owners Insurance seems relatively straight forward, but there are some common mistakes couples make when purchasing.
Many homeowners may learn about their insurance policy’s small details only after experiencing a disaster such as a hurricane, tornado or wildfire. Knowing your policy thoroughly is the key to making sure you are properly covered for these situations.
Common Mistakes:
- Assuming you are adequately insured. More than likely your home is under insured, do your homework and be prepared to ask your agent very specific questions regarding your insurance.
- Not reading the policy. There are people working night and day printing material that no one reads. Granted there's lots of legalese in fine print and plenty of insurance terms but READ the policy and if you have questions write them down and call your agent.
- Relying on a computerized estimator. Most companies arrive at homeowner coverage amounts with replacement cost estimate tools. They use formulas that get close but no bull's eye. You need an on site inspection.
- Lack of flood insurance. Many insurance companies do not cover flooding, but purchasing a policy may be possible in participating communities through the National Flood Insurance Program. Be sure to check if you live in a flood zone. There is a wonderful term called 'anti-concurrent causation' which means that if you are covered for one type of disaster (wind damage) and not covered for another type of disaster (flood damage) and both occur at the same time, the company won't pay for either of damage.
- Underestimating the time needed to rebuild your home. Make sure you know what period of time your policy covers for additional living expenses. Find out what's covered such as clothing, temporary housing, ongoing needs like monthly rent or gas mileage allowances.
- Underestimating your personal property coverage. Coverage of personal property is divided into a list of categories such as furniture, electronics, clothes.......When you buy insurance, be sure that you ask your agent to list these specific personal property categories and detail specific replacement dollar limits per category, especially which limit can be raised and which cannot.
- Not keeping additional personal property documentation. Remember, the insurance company wants to keep it's money and even though items are listed, the company often require additional proof. Make sure you video and pictures are a must. Keep receipts for anything of value that you purchase. Keep these items in a safety deposit box.
- Not understanding the difference between full replacement value and actual case value. Ask your agent whether your personal property items are covered for their actual cash value or their full replacement value. for example, if item A looses 10 percent of it's value immediately after purchase and you've chosen full replacement coverage, depreciation isn't a factor if item A is destroyed in a disaster.
- Not keeping your policy updated. Contact your agent when you make any improvements or make any major purchases.
- Having a deductible that too large. Higher deductibles may help keep your premiums a little lower but if you have a situation that requires paying the deductible and it real high....it could place a unwanted financial burden on you and the family.
