Mistakes to Avoid When Buying Homeowners Insurance
Even though it might be tempting to get a basic policy to save money on fees, this could come back to bite you later. Professor Jay Feinman, an insurance expert at Rutgers University Law School, says that the biggest mistake people make when getting homeowners insurance is to focus on price instead of coverage or quality. “You should know what kind of insurance you’re buying, what it covers, and what it doesn’t cover.”
To avoid unpleasant surprises, buy enough insurance to replace or rebuild your home and its goods, as well as any outbuildings like a garage, pool, or fence. This includes your heating and cooling equipment, your furniture, your clothes, and anything else you own. “Two-thirds of American homes are significantly underinsured,” says Feinman. “Try to get a good idea of how much it would really cost to rebuild.” He said that after a big event, these costs can be higher. “When a lot of people need to rebuild at the same time, costs go way up,” he says.
It’s also important to carefully read your insurance and know exactly what it covers and what it doesn’t. If something you’re worried about isn’t addressed, like damage from a tree falling on your house, ask for a written statement that explains the situation.
Last but not least, review your insurance every so often to keep getting the best rates. Home insurance companies usually raise their rates every year for a variety of reasons, including inflation, the value of your home going up, and other things. Most of the time, they are so small that you don’t even notice them, but they can add up over time. To get your business, another insurance company may have a reason to offer you a lower monthly price.
You can also ask the company you already work for if they offer a deal for loyalty. Depending on how long you stay with a company, your premiums may go down by a certain amount.
How much does insurance for a home cost?
The age, size, and location of your home, as well as the chance of a major weather event in your area, can all make a big difference in how much your home insurance costs. Average premiums for the companies we looked at were between $100 and $170 per month.
Lynne McChristian, a communications consultant at the Insurance Information Institute, says, “Where you live and the natural disasters that happen in that area are big factors.” Home insurance can be very expensive if you live in an area that floods often.
Homeowners insurance is also likely to cost more in places where there are more crimes, where it costs more to rebuild, or where building rules are stricter. And a home that is miles away from a fire station run by professionals may cost more to insure than one that is close to a fire station with paid firefighters.
The age and state of the roof, furnace, and other major home parts can also affect how much homeowners insurance costs. Security systems and fire sirens can make insurance rates go down. The cost of a standard premium can go up if you need extra coverage for things that are very expensive. Lastly, the size of your deductible, or the amount you pay out of pocket if you file a claim, will probably affect your monthly insurance rates. Most of the time, your premiums will be lower if your deductible is bigger.
Even if you already have homeowners insurance, it’s a good idea to look over your costs and coverages every year. As the real estate market changes and you buy more things, your coverage needs will change over time. Also, home insurance is a competitive business, so comparing rates every year could save you money even if you’re happy with your present insurer.
How do I choose what to talk about?
Standard homeowners insurance might not cover enough to fix or replace your house and belongings. This could happen if the cost of rebuilding in your area is higher than average or if the tools and things you have insured are very expensive. If you are in any of these scenarios, you may want to check your policy’s coverage limits.
Most insurance companies offer extra coverage for a fee. You can increase your coverage maximums or buy special add-ons to cover your valuables. For instance, a normal homeowners insurance policy might not cover valuable jewelry, art, or collectibles well enough. Other things, like a swimming pool, that could cause a safety or liability risk may also need extra coverage.
Also, flood insurance isn’t usually included in standard home insurance policies. It would be called an add-on or extra policy. Also, based on where you live, you may not be able to get flood insurance from all insurance companies.
If your homes insurance company doesn’t cover floods, you may be able to get coverage through the National Flood Insurance Program (NFIP), which is run by the Federal Emergency Management Agency (FEMA). Policies from the NFIP are sold all over the country by independent dealers. Costs and requirements can be very different based on how dangerous your area is. On the FEMA website, there is a live flood map that you can use to find out how likely flooding is in your area.
How much insurance do I need for my home?
To figure out how much insurance you need, you need to know how much it would cost to rebuild your house. You should also make a list and value of your furniture, clothes, and other things.
Figure out how much it will cost to rebuild your home and any other structures like a garage, pool, or yard. To get a rough idea of how much your home will cost, multiply the number of square feet by the cost per square foot in your area. For example, if your house is 2,200 square feet and building costs in your area average $80 per square foot, it would cost about $176,000 to rebuild it. A neighborhood insurance agent, real estate agent, or appraiser might be able to help you figure out how much a house costs in your area.
Include personal items like a barbecue grill, collectibles, musical instruments, and tools for hobbies or sports. And don’t forget things like blankets, silverware, and things in the attic or garage that are out of sight. On the website of the Insurance Information Institute (III), you can also find a lot of information about making an inventory and other things connected to homeowners insurance.
The better your collection is, the more details you put in it. The III says it’s a good idea to keep track of when and where you bought expensive things because that will make it easier to figure out how much they’re worth and file a claim.
Use video to keep track of what you have. Take pictures of the things in each room of your house, and don’t forget to update your list every so often. You can also download apps that will walk you through the process and store your inventory online.
Think about how much it would cost to replace your things. This is the price you would pay now to replace an item, like a washing machine. It is not the price you paid when you first bought it. Replacement costs can change quickly because of inflation and other factors. Even if you bought an item two years ago, it might cost you a lot more to replace it now than it did when you bought it.