Do you know why they say owning a home is a huge investment? One of the reasons is that it comes with numerous responsibilities. Besides doing regular home maintenance, you also have to think about getting the home insurance coverage that best suits your budget and needs. You have to be cautious if you don’t want to fall into the trap of insurance packages that are too good to be true. Thorough research will ensure that you are not duped into paying something that will not pay off later on. With that being said, you need to be wary of these home insurance mistakes so you can avoid them:
Getting Home Insurance Based On Market Value
The real estate market may be stable, but it can also have some volatility. Home market values can plunge suddenly. For most homeowners, it can be tempting to change their insurance plan to match the current value. This is a huge mistake. Ideally, your home insurance should be proportional to the full cost of rebuilding the home. Companies often require at least 80% of the rebuilding cost, and failing to do so can lead to tons of penalties. This is something you don’t want to happen, as it will significantly reduce the claim money that insurance providers will pay you after a loss.
Basing Home Insurance On Cost
When shopping for a homeowner’s insurance, you should look beyond the cost. While you don’t want to overpay your insurance, perhaps a quote from a company is much lower because the coverage is less comprehensive. Before you even buy an insurance package, it will be best to start by identifying your needs. From there, you can choose the plan that best meets your requirements. When comparing insurance companies, make sure that you are comparing apples to apples. This way, it is easier to know if you are actually getting the right value.
Forgetting About Flood Insurance
Flood insurance is not part of standard home insurance. Most homeowners who believe that they are not at risk of flooding and skipping flood insurance can be tempting, but this can be a terrible mistake. For most experts, the only time you can forgo flood insurance is when you live on a mountaintop. In the U.S., flooding is among the most common types of natural disasters, and, ironically, about 20% of flood payouts are handed out to homeowners who live in low to moderate flood risk zones. Remember that the National Flood Insurance Program (NFIP) also mandates homeowners in high-risk areas to get flood insurance.
Setting Deductible Inaccurately
Some homeowners will try to set high or low deductibles, thinking that it will help them cut down their costs. In theory, the idea seems plausible, but in reality, this strategy can backfire. A deductible that is too high can cause you to pay a hefty premium. On the other hand, setting your deductible too low can have you paying more if something comes up. In general, your deductible should be between $500 and $1,000.
Skipping the Discounts
In case you don’t know yet, you can be eligible for a discount if you can make sure that your house has installations that increase its safety. From installing smoke alarms and carbon monoxide detectors to doing regular home maintenance can be used to reduce your insurance package. You can also bundle your car and home insurance with the same agent to lower your policy’s cost.
Consider these items when shopping for an insurance package. This way, you can be sure that you are getting good value and that you have the necessary protection if something happens.