Common Insurance Mistakes Homeowners Make
The most common insurance mistakes homeowners make are not learning the difference between actual cash value coverage and replacement cost, having insufficient liability coverage, and not having additional flood insurance. Read more in our guide below so you can avoid making the same homeowners insurance mistakes.
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UPDATED: Nov 7, 2020
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Purchasing home insurance can be a confusing process, and many homeowners make similar mistakes, such as believing the policy covers every possible problem or even completely repair the home. By understanding some of the more common mistakes, you can get the best coverage at the lowest price.
Start with these 6 common homeowners insurance mistakes, and then ask your agent about other ways to save.
- Cost vs. Replacement value can make a huge difference in your out of pocket costs. Actual cash value coverage is a depreciated amount of the original property value, and may not cover full repairs. Replacement cost coverage will add a small amount to your premiums, but it will completely restore the home to its original condition, after the deductibles have been met.
- Each time you file a homeowners insurance claim, the risk of providing you with coverage increases proportionately. Even if you have a legitimate claim, it could be less expensive in the long run to pay for the repairs or replacement out of pocket. If the complete cost is only slightly higher than your deductibles, filing a claim for the remaining amount could do more harm in the long term than handling the problem yourself.
- No standard homeowners policy covers everything. One very important example of this is flood insurance, which is not included in any type of standard home insurance policy. Because the threat of flooding is so severe, coverage may only be available through high risk or government-monitored insurance programs. Make sure that your policy covers all of the perils your home may face.
- Liability claims against your policy have limits that could leave you paying a bundle. If a tree on your property falls over and damages your neighbor’s house, your liability coverage may not be sufficient to pay the full cost of damages, especially if bodily injury is involved as well. Because the question of sufficient liability is common among different types of insurance, anumbrella policy is available that will increase the liability limits of several different policies.
- It is important to have enough coverage for your needs, and standard home policies often fall short in critical areas. Personal property is a good example of how a standard policy can leave you on the short end, because most policies only insure your personal property for a small percentage of the total home value, while an average family may have many thousands of dollars in personal belongings.
- You can get a cheaper home insurance policy by simply investing in simple home security. Taking more responsibility in the safety of your home is a good way to reduce the cost of your home insurance. Simple things such as installing deadbolt locks or burglar bars will cut costs, but having a monitored home security system will save you the most. Even installing a fence around the property reduces the risk of vandalism and burglary, resulting in lower rates.