Homeowners Insurance Mistakes
Before we even get started, let’s assume you already know what Business Insurance is. You see, there are natural disasters such as extreme snows and tornadoes reaching great heights in some countries especially in the United States. There are also major weather events and anomalies moving across the country.
These events and the ones that will likely occur in the future have propensities to bring scores of sad stories of owners of many homes finding out that their insurance policies didn’t efficiently cover them the way they had envisaged. The implication is that people could incur huge unanticipated expenses, but in all, try now to make these Homeowners Insurance Mistakes
The High Cost of Fine Print
Therefore, it is best to be proactive before the ugly event occurs. Escaping natural disasters may not be assured but you can be better prepared by reviewing your home owner’s policy to ensure you are very adequately provided for and protected.
According to the director of insurance for the consumer Federation of America, Robert Hunter, “Is it not in your best interest to find out now what your insurance covers and what is not rather than in a later time, when you decide to file a claim only to find that the insurance company won’t pay”?
Let us now look at these four mistakes we make when we are reading through our homeowner’s policy. The steps to take if you are guilty that are appropriate are also stated below.
Related: Types of business insurance
Homeowners Insurance Mistakes That Must Be Avoided
- Underinsuring your house
It has been stated by experts of insurance that the biggest mistake homeowners make is failing to have insurance that can cover the cost of rebuilding your house if it is in any way destroyed. A study conducted by Amy Bach, an executive director of the consumer advocacy group united Policyholders, in 2009 revealed that two thirds of US homes are underinsured.
The cause of this is apparent. Many homeowners end up buying enough insurance that can cover their mortgage. They tend to forget that the mortgage may be in the best case scenario, 80 or 90% of the value of the house, this is dependent on the original down payment and very less on the event that the house appreciates in value.
Again, some policyholders may insure an amount that is equated to the current value of their homes. This figure however may be much less than the actual cost of rebuilding your house, including labor and supplies which can rise sharply after a disaster in the form of storm if there is high demand and short supply.
What Should Be Done
First, it is necessary to calculate what rebuilding your house would cost. It is best you inquire from your insurance agent though Bach prefers and encourages one to use a professional home-replacement cost estimator, who will likely bring out more accurate number. The fee for this could be about $300 though some insurers offer service for free to those customers that have high-value.
Alternatively, one can make use of a local real-estate agent, builder, contractor or building association for the cost per square foot for the average rebuilding of a home in you vicinity or pay for an estimate from websites such as HM Facts or Accucoverage.
The moment the cost of rebuilding has been ascertained, check to see if your coverage is close, if it is not, you might want to increase your protection.
When estimating the cost of rebuilding, don’t forget to put into consideration what you will pay to replace any unique features in your house, such as marble floors or high-end wood working.
You are also advised to ask your insurer about an automatic inflation provision. This is to avoid repetition of calculation every year. This may raise your premium in the long run.
Again, it one can take the option of getting extended replacement coverage. The implication of this is that the insurer would cough out up to 125% of your policy limit to rebuild your home.
The real deal and the most expensive option is “guaranteed replacement cost coverage”. This refers to where they insurer gets house rebuilt no matter what it costs.
You are rightly advised that you ensure that you are adequately covered for your valuables; jewelry, art, antiques and computer equipment. You can good tools such as the free software and iPhone/Android app, and KnowYourStuff.org, from the Insurance Information Institute to take inventory.
Don’t forget to ask the insurer how much you will be paid if your belongings needed to be replaced. The amount can be based on the worth of the items and what it will take to replace them. This is a better but obviously more expensive alternative. It will be good to buy extra coverage in the form of floaters or riders, for jewelry, electronics or art since policies ordinary limit protection and coverage for valuables.
- Assuming you have flood insurance
The protection against flood is usually not part of a standard homeowner’s contract. If your house is any way located near a lake, river, flood plain, ocean or any other water body, it is imperative that you buy protection against flood. This could also help in getting mortgage in certain places.
According to the institute’s director of media of media relations, Michael Barry,” Those living in the in land areas near water can also be affected by flood even in hurricanes so it is not just coastal areas that need insurance”.
Barry went to illustrate with examples. In his words, “That was a huge problem in Hurricane Sandy and even more so the year before, with Hurricane Irene which caused inland flooding in New Jersey; Albany, New York; and even Vermont,”
As far as you want flood insurance, you get it. It is a federal program that accepts all who want the protection.
The price for the coverage varies. The variation is a product of the risk of flooding and the amount you want. It can be $55 a year for $8,000 of above-ground, contents-only coverage in an area that has low-risk or over $8,000 for $250,000 “basement and contents” protection in a high-risk area.
What should be done?
Ascertain if you need this extra protection by paying a visit to the National Insurance Program’s site. The site is Floodsmart.gov. If your home is any way at risk, get flood insurance from your insurer. If He refuses to sell which rarely happens, then you get a private insurer that can sell and service flood insurance policy for you. The list of private insurers is always the Federal Emergency Management Agency.
- Thinking you have one, flat deductible
It would be wrong to think that your maximum out-of-pocket cost would be any amount.
In the event that one experiences storms like hurricanes or other major weather events like windstorms and earthquakes, the deductible is usually a percentage of your coverage. Therefore, it is likely going to end up being 1 to 5% of the insured value for a flood or as much as 10 to 15% of your protection for an earthquake.
The implication is that if your house is insured for $600,000 and you sustain damage in a windstorm, you be left with a $30,000 deductible when you file your claim.
What should be done?
Inquire from your agent or insurer the kind of deductibles your policy has depending on the cause of damage.
When you have found out, inquire about getting a policy that has the same flat-rate deductible no matter what. This may be hard to find and will be more expensive without doubt.
Are you stuck with a potentially sky-high deductible? Then it is best to be sure you have enough in emergency savings to come up with the cash, if necessary. I’m sure you agree with me.
- Believing you’re covered for mold or sewage backup
A noticeable anomaly in many homeowners’ policies is that they don’t offer this protection or have claim limits.
What should be done?
Inquiries have to be made about additional coverage for protection from mold or sewage backup. This is often in large downpours.
The good news is that the cost for sewage backup is not very expensive. It is just about $40 to $50 a year. It’s worth buying I suppose.
The only significant problem is that mold insurance can run about 10 times the cost sewage backup. It is not easy to find but promises a good investment in the long run if found.
Therefore, carry out detailed assessment of your risks to determine if you need mold protection. I bet you will need it especially if you live in a humid area or your house is old and was built without mold resistant materials. This is so because the newer homes have a higher possibility of been built with mold resistant materials.
The high cost notwithstanding, mold coverage will be a worthwhile expenditure given that the cost removal is quite high. Besides, insurance is to protect you against large expenses after all.