Getting the right home insurance policy will give you peace of mind and help you save money. Buyers, however, make a lot of mistakes when choosing homeowner’s insurance. If you’re buying a new home soon, do your best to avoid these four common mistakes that other people make.
They Underinsure Their Homes
No one wants to pay more for their homeowner’s insurance policy than necessary. Unfortunately, some studies find that about 66 percent of homes in the United States don’t have enough insurance coverage.
People often underinsure their homes because they think that they need to protect the property’s value. In reality, you need a policy that will pay to have your home rebuilt. Once you include the cost of materials and labor, your home’s rebuild cost can quickly exceed its value.
If you don’t have enough protection from your policy, then you could get stuck with a hefty bill when it comes time to rebuild your home. After all, your insurance provider isn’t going to pay more than it has to.
They Assume They Have Flood Insurance
In nearly all cases, your standard homeowner’s policy does not include flood insurance. Instead, you have to buy a separate flood insurance policy.
If you live in a flood-prone area, then your mortgage provider will probably require you to purchase flood insurance. Just because your lender doesn’t require flood insurance doesn’t mean that you shouldn’t buy a policy.
Flood damage can happen in places that don’t regularly see high water levels. In 2016, Hurricane Matthews caused waist-deep waters through large parts of Florida, Georgia and Louisiana. Only 2 percent of Georgia residents had flood policies. Homeowners didn’t buy the extra policies because they didn’t live in flood plains. Suddenly, they found themselves facing expensive repairs.
Talk to your neighbors and insurance agent before you decide whether you need a flood insurance policy. If any of your neighbors have experienced flooding, then you should consider buying a policy that will protect you.
They Choose Excessively Low Deductibles
Choosing a low deductible makes sense to a lot of homeowners who want to make sure that their insurance providers pick up the cost of repairs. By choosing a low deductible ($500 for instance), your insurance company will start paying for repairs quickly.
Lowering your deductible too much will force your insurance company to raise your monthly premiums. Insurance companies don’t want to pay for home repairs. They would rather give you most of the burden. When you refuse to accept a higher deductible, insurance companies protect themselves by charging you a higher premium.
Doubling your deductible from $500 to $1,000 could lower your premiums by as much as 25 percent. Once you get a cheaper premium, it doesn’t take long to save the $1,000 that you will need when your home gets damaged.
They Don’t Compare Enough Insurance Providers
Insurance companies use their own property reports and metrics to determine their policy prices. Since each company takes its own approach, prices can vary significantly. That makes it crucial for you to get policy quotes from several companies.
Prices can also go up or down when you experience a major life change. If you get married, build an addition onto your home or have children, then you should revisit your policy to make sure you have the proper level of coverage.
You should also compare policies every few years to make sure you’re still getting a good deal. A company that gave you a good price 10 years ago could overcharge you today. You’ll never know until you comparison shop.
Getting good coverage at an affordable price takes some time and research. When a disaster strikes, though, you’ll have the protection that you need to repair your home without spending much of your savings.