So you finally have the home of your dreams and now you’re strapped for cash. In order to save some money, you may head to the clearance section for home décor, building materials, and lawn care equipment. However, when it comes to homeowners insurance, you want to ensure your policy offers suitable coverage for your home as one of the new homeowners.
Failing to buy adequate homeowners insurance can be way more financially distressing than paying a higher monthly premium for the correct coverage, especially when disaster strikes. While it’s hard to picture something devastating happening to your new home, especially when you’re still feeling that new-home high, catastrophes can occur in the blink of an eye.
Here are five common mistakes homeowners make when shopping for insurance.
1. Under-Insuring Your Home
There are many reasons why new home buyers opt for bare minimum coverage: some pick the low hanging fruit in order to obtain financing, others may feel a false sense of invincibility and underestimate the likelihood/severity of a disaster, and some just flat out don’t understand the coverage options.
To ensure you’re not buying inadequate insurance, find a policy with full replacement cost. Full replacement cost is the amount it would cost to rebuild your home if it were to be completely destroyed. Moreover, “a lot of homeowners need to choose an insurance company that offers all-peril policies,” says Allstate Insurance Agent, Nylene Baney. All-peril means damage from ice, snow, sleet, fire, lightning, water and sewer, wind, and vandalism are all covered.
2. Going For the Cheapest Policy
“Typically,” says Baney, “the lower the deductible, the higher the premium and vice versa.” It comes down to how much you’re willing to spend at the time of the accident. Keep in mind, you can’t guarantee your finances in the future and you can’t perfectly predict the weather. With consideration of these factors, a high monthly premium can sound pretty enticing come time for making weather-related repairs.
“I want to stress that it’s not always a wise decision to go with the cheapest [policy],” suggests Baney. “There’s a reason why that policy is so much cheaper than the others.” To avoid falling into the trap of tempting low cost yet highly limited-coverage policies, be sure to have a thorough discussion with your agent to understand exactly what coverage you’re offered at any given price point.
3. Not Taking Inventory
Trust us, everyone has a lot of stuff—many of us have more than we know what to do with—which is precisely why you need to take inventory of it all. Standard homeowners insurance generally covers both the structure of your house and your personal property, if it’s inventoried. If it’s not, then homeowners wind up taking a flat payout (or even a rejection of payout) for their damaged and destroyed belongings.
Talk to your agent about your personal property to see if there is anything particular for which you should purchase extra protection, such as valuable jewelry, antiques, or expensive electronics.
If you want to keep things organized, you can download printable Home Inventory Checklists offline or you can utilize a variety of mobile inventory apps like Allstate’s Digital Locker.
“With personal property, I always advise homeowners to take pictures,” says Baney. In addition to taking stock of your belongings, be sure to update your insurance agent when you’ve renovated your home, purchased new appliances, added a pool, or adopted/purchased a pet (houses with pools and pups often see a higher premium as they present a higher risk). Without updating your agency of household changes, your provider may have the right to reject your claim.
4. Failing to Understand the Risk Factors of Your Home
Just because it’s a new house, doesn’t mean the plumbing and electrical systems are bright and shiny. Consider your neighborhood, your lifestyle, the trees surrounding your house, the condition of your plumbing, electric, roof, and prior damage incurred to the house before you purchased it (fires, floods, mold, etc.).
To lower your risk factors, and in turn, your premium, make changes such as:
- Installing deadbolts, new locks, and a security system.
- Ensuring all rooms have smoke detectors.
- Update your heating, electric, and plumbing systems.
- Fix any broken stairs, sidewalks, or entryways.
- Avoid putting in a swimming pool.
5. Not Bundling Homeowners Insurance
“Your best price will always be quoting home and auto together,” reminds Baney. Although many of us purchase a car long before we buy a house—and therefore have an existing insurance policy with a different agency (or maybe even the same one)—we often forgo consolidating policies.
If you’re using the same carrier, it’s a no brainer, and it’s probably a smooth process for bundling your insurance. If you’re working with two separate agencies, ask both of them about discounts, special offers, and coverage if you switch over and consolidate your accounts.
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