Top 10 Mistakes Made When Buying Home Insurance

Your dwelling coverage needs to reflect the estimated reconstruction cost, if a policy is done correctly and you suffer a total loss you want the insurance proceeds to come as close as possible to your cost of reconstruction to limit your out of pocket exposure. Too often we see errors, such as insuring the home for market or assessed value which have nothing to do with the estimated reconstruction cost. Typically, you want your policy to be for replacement cost not the market value of your home. Building a house comparable to the one you have often costs more than the house is actually worth, especially if you have a lot of upgrades or if home construction prices have risen in your area and property values have fallen.

 

Your dwelling coverage needs to reflect the estimated reconstruction cost, if a policy is done correctly and you suffer a total loss you want the insurance proceeds to come as close as possible to your cost of reconstruction to limit your out of pocket exposure. Too often we see errors, such as insuring the home for market or assessed value which have nothing to do with the estimated reconstruction cost. Typically, you want your policy to be for replacement cost not the market value of your home. Building a house comparable to the one you have often costs more than the house is actually worth, especially if you have a lot of upgrades or if home construction prices have risen in your area and property values have fallen.

 

Many homeowners believe their policy will cover all personal property they own, which is never the case. Most policies have severe limitations for specialty items. Common but not all examples are collections, jewelry, business equipment, portable equipment, etc. You need what is known as “floater coverage” to protect your applicable possessions.

 

Homeowners insurance covers most damage to your home, but all policies have exclusions, common are Flood damage, backup of sewer and drains, earthquake, and many other perils. For additional cost some exclusions can be modified. It is just as important you know what you are not covered for as to understand the major coverage items a policy starts out with.

 

Your homeowners insurance will not generally pay for normal wear-and-tear. For example, if you need new pipes because your pipes are old, or similar issues arise same for your roof or electrical, few if any policies provide coverage. Don’t assume that just because you have a home insurance policy that you won’t need to be financially prepared for problems with your home. Have an emergency fund to take care of problems.

 

Most of the time you will earn discounts buying your homeowners and car insurance through the same insurance company or Agent. Discounts can often be substantial make sure you look into “bundling” coverage.

 

The deductible is the amount you have to pay before your insurance kicks in. There is no such thing as a standard deductible.  If you have an expensive home and a higher premium taking a higher deductible can often be cost effective. If you have a lower premium then a higher deductible likely is not a smart buy. Also appetite for risk varies between buyers. There’s no automatic right or wrong, work with an Agent that is creative and offers you deductible options.

 

Homeowners’ policies typically contain a large amount of fine print, legalese, and insurance company terminology. Read through the policy carefully and in full. Keep a pad of paper nearby to jot down questions for a discussion with your agent.
Insist that your agent specifically define any legalese and insurance industry terms that you don’t understand.

 

When making major home improvements, such as adding a room or pool, a garage or remodeling a kitchen, you’ll need to notify your agent whenever significant changes are made so that your policy keeps pace with its reconstruction cost.

 

Policies contain liability coverage very important protection, but often start out providing far too low a limit, in some cases only $100,000 of protection. That may sound like a lot but if one or more people are seriously injured and sue you it is far from enough. It costs very little to increase this coverage, many Agents miss this, you should purchase the maximum liability coverage the carrier offers  and compare how much coverage different carriers offer with your Agent.

 

 

Protect your home, family, and possessions and find peace of mind with a home policy from LJ Brudnick & Sons. Call us today at 617-889-1100.