Did you just buy your first home? If so, you know there are hundreds of things to do before your move-in date.
One of those things, and perhaps the most necessary, is buying homeowners insurance. The problem is, as a new homeowner, you’re not sure what to do exactly.
Keep reading to learn the most common home insurance buying mistakes to avoid.
1. Underinsuring Your Home
One of the biggest home insurance buying mistakes you can make is underinsuring your home to save money. Never sacrifice coverage for a cheap premium.
A minimum amount of insurance is needed to meet the requirements to get a mortgage. However, you’ll likely need more than the minimum amount.
The money you save on monthly premiums won’t be worth it if you ever need to file a claim but are underinsured.
2. Making Assumptions About Coverage
A home insurance provider will include certain things in their coverage options. There is an assumption made by homeowners that a basic home insurance policy covers everything.
You might need to complete your coverage with additional options for insurance. These are some of the situations that basic insurance policies don’t cover:
- Flood
- Mold
- Earthquake
- Sewage backup
You’ll need separate natural disaster insurance to cover other situations.
3. Failing to Understand the Terms
Home insurance terms differ in actual cash value and replacement costs. If you have to make a claim, it’s important to understand these two terms.
Actual cash value claims payout the amount your items are worth at the time. This means you aren’t paid for replacement costs unless possessions are brand new.
Choosing a policy that covers replacement costs means you’ll have the funds to replace items for the cost you originally paid for them.
4. Not Knowing the Risks
If your home is in a high-risk zone, you need to know how insurance works to cover those risks. For example, if flooding is common where you live, figure out how often they occur and what flood zone you are in.
If you find that your home is at a higher risk for certain damages, you’ll need more than a basic policy.
5. Underestimating the Value of Possessions
Don’t guess the value of your home and possessions or it could cost you thousands of dollars when you need to file a claim. Research the cost of building materials and take inventory of possessions to get an estimate.
Your policy needs to have the coverage necessary to cover your home.
6. Failing to Update Your Policy
When your home or possession value changes, your insurance policy should too.
If you make a significant change to your property, the insurance provider needs to know. The same rule applies if you make an expensive purchase.
Your insurance will cover potential losses when you update it accordingly.
Home Insurance Buying Mistakes to Avoid
There are a lot of home insurance buying mistakes to avoid but the above five are the most common.
Don’t underinsure your home, make assumptions about coverage, or fail to read the terms. Understand the risks in your area, estimate the value of your possessions, and update your policy.
When you do all of these things, you will be protected if you ever need to file a claim. Don’t forget to keep coming back for more blog posts like this on our website.