4 Homeowners Insurance Mistakes to Avoid
by Maurie Backman | Published on Aug. 29, 2021
Here are a few blunders that property owners should aim to avoid at all costs.
Owning a home doesn't just mean covering a monthly mortgage payment. It also means keeping up with a number of associated expenses, like property taxes and homeowners insurance. But while property taxes are determined by townships and municipalities, homeowners are tasked with putting the right insurance coverage into place. And that could lead to a world of mistakes. Here are a few such errors that should be avoided.
1. Not buying enough insurance
One important feature of homeowners insurance is that it offers replacement cost coverage. If a property is destroyed, the goal is to have enough replacement cost coverage for a complete rebuild. Not getting enough replacement cost coverage is a big mistake that could prove devastating in the event of a major catastrophe, so homeowners should do their research to see how much coverage they need.
2. Setting too low a deductible
When it comes to homeowners insurance, premiums and deductibles tend to have an inverse relationship. A premium is the fee you'll pay (monthly or annually) to have insurance in the first place. A deductible is the amount you'll pay out of pocket every time you file a claim against that policy.
Generally speaking, a lower deductible means paying a higher premium for homeowners insurance, and vice versa -- a higher deductible means paying a lower premium. Some homeowners opt for lower deductibles so they don't have to spend as much when disasters strike. But that could result in higher premium costs that are difficult to keep up with.
Now, it is possible to have a year when it's not necessary to file a homeowners insurance claim at all. In that case, committing to a higher premium could mean losing out financially.
3. Failing to inform the insurer when safety features are installed
Certain home features can lead to lower insurance costs. For example, installing an alarm system could result in discounted premiums since an alarm system helps protect the property and lowers the risk of a break-in. It's important that homeowners let their insurers know when they make changes that could lead to savings.
4. Not bundling homeowners and auto insurance
Not everyone who owns a home also owns a vehicle. But for those who do, it pays to look at using the same insurance company for both homeowners and auto insurance. Often, there are discounts to be had for bundling those policies (meaning, using the same insurer for both).
However, this isn't always the case, so homeowners who own vehicles shouldn't assume they'll get the best deal by going the bundling route, either. Ultimately, it's important to research insurance options before committing to a policy, whether for a home or vehicle.
Having the right homeowners insurance policy in place could make a huge difference when a property sustains damage, so it's important to shop around for coverage. At the same time, it's imperative that homeowners steer clear of the mistakes above to protect themselves financially and avoid overspending on a plan.
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