Tips to Find the Best Homeowners Insurance Coveragehttp://www.fool.com/how-to-invest/personal-finance/2014/03/16/tips-to-find-the-best-homeowners-insurance-coverag.aspx Jason Van Steenwyk, NerdWallet
March 16, 2014
For most middle-class families, the home is the most valuable asset -- often outstripping even the 401(k) and 403(b) for all but the most diligent savers.
Yes, for generations the home has been an important store of value for Americans. It's often a treasured asset -- a legacy that older Americans can pass down to their children and grandchildren. In other cases, it's a vital source of retirement income -- converted to cash either via an outright sale or rental, or thought the conversion of home equity to a reverse mortgage.
The problem: Your home is at risk. Every day, Americans lose their homes to a variety of hazards -- and not just to the obvious.
Fortunately, loss or severe damage to a personal residence lends itself well to insurance. But too many Americans don't adequately protect themselves against possible devastating losses -- losses they simply can't afford.
These mistakes are almost always avoidable -- if the homeowner is well advised. Here are some of the most common mistakes homeowners make when insuring their homes.
Not getting flood insurance
The risk, for the individual homeowner, is huge. The average claim actually paid out for Hurricane Sandy, the storm that ravaged Florida and the Northeastern Seaboard in 2012, was $58,358. The average paid claim after Hurricane Katrina was $97,052 -- per policy affected.
But only 13% of Americans have a flood insurance policy, according to the Insurance Information Institute.
If you can't afford to lose this amount of money, you need flood insurance. For private homeowners, this is normally only available via the National Flood Insurance Program. This is a federal program that underwrites up to $250,000 for your home, and another $100,000 for its contents.
Is your home or contents more valuable? You probably should look at buying additional coverage. For more information, visit Floodsmart.gov.
Poor or non-existent household inventories
If you use your home for business purposes, you may also need to arrange for additional coverage.
Inventory information is confidential, and stored off site, so you don't have to worry that the same disaster that destroyed your home will also destroy your inventory documents.
Underestimating replacement cost
Not insuring against local risks