Mistakes to Avoid When Purchasing Homeowners' Insurance

Tracianne Leggio - 2014-04-07

Purchasing a home can be a harrowing experience, including the purchase of homeowners' insurance. There are many things to understand about your policy, from coverage to deductibles and how to define a hurricane. We all look to save money whereever we can and that includes the purchase of insurance. Here are some tips to consider when purchasing homeowners' insurance.

1. Consider the amount of coverage you are insuring your home for. When getting quotes from your insurance agent, you want to carefully consider how much to insure your home for. A lot of people make the mistake of insuring their purchase price or mortgage amount. While those numbers may or may not be close, they are often incorrect. When insuring your home, it should be for the replacement value of your home. This is determined by square footage, the style of home you have, and whether your home is basic, deluxe, or superior construction. Your agent can help you determine the coverage amount by using a replacement cost estimator to get an estimate of the rebuilding cost. Also, most companies will do an inspection after your coverage is in effect to ensure that the home is covered to full replacement value.

2. Consider getting additional coverage. Many homeowners decide to forgo extras, like flood insurance or jewelry coverage, thinking their homeowners' insurance wil cover every possible loss. Flood insurance policies are often a separate policy with a separate premium covering flood specifically. Items like jewelry usually have restrictions on a basic homeowners' policy and you may need to add coverage for more expensive or sentimental pieces. The worst thing to happen would be to think you have coverage and find out you don't. Make sure you ask all the questions about claims that may be a concern for you. This will help you understand your policy and make sure you are covered the way you'd like to be.

3. Don't get rid of flood insurance. Most homeowners' are unaware that they are at risk for floods, even when they aren't close to the water. In fact, 25% of all flood claims occur in low risk areas. In times of heavy rain or significant snow melt, everyone is at risk for a potential flood loss. Consider keeping your flood insurance, even after paying off your mortgage and you are no longer required to have it. A lot of people are under the misconception that the government will help out if you are in the middle of a disaster. That help only comes if you are declared a disaster by the federal government. Most of the time that help is in the form of low interest loans that you must qualify for. Additionally, there is often a requirement to purchase flood insurance to obtain the loan; this policy will now cost more since you have had a claim.

4. Don't shop on price alone. Oftentimes, policies that offer the lowest rates also provide lesser coverage. Make sure each quote you obtain covers replacement cost on your home and belongings. There is nothing worse than filing a claim only to find out you are getting a depreciated amount for the loss. Choose a policy that covers you fully and you can avoid large out of pocket expenses in the event of a claim. A better way to save money is to increase your deductible or package multiple policies with the same carrier. Your agent can help you find other discounts to save money as well.

5. Don't skimp on liability coverage. This is often the least expensive part of the policy so buy the most coverage available, especially if you have a pool. For as little as $20 a year, you can purchase $500,000 in liability coverage. Additionally, you should consider a personal liabiltiy umbrella policy for additional liability coverage. This umbrella, as it's known, will provide extra liability over your home, cars, boats, motorcycles and secondary homes or rental homes.

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