If death and taxes is the top 2 items that’s a sure thing, insurance has to be a close third. At least it’s true when it comes to financially protecting yourself. According to independent studies, here’s the top 5 mistakes most people make when it comes to buying insurance on a home.
1. Your dwelling limit is not enough to rebuild your home in case of a total loss.
With constantly rising building and labor cost over the years you may find the cost to rebuild your home may not be enough.
2. Make sure your policy includes replacement cost as opposed to actual cash value.
Putting market value first is a bad idea simply because the value of your home can go up and it can go down, depending on what the economy is doing. For example, the interest rate changes, the demand for housing in your area changes, today it could be a buyers market and tomorrow it’s a sellers market.
However, using replacement cost; which is the amount it would take to replace or rebuild your home at the current price offers you the most protection, no matter what the current housing market is doing.
Have your insurance agent sit down with you and see how much coverage you currently need to replace your home. And do the same with your personal property, to protect your possessions should you experience a fire or other natural disaster.
3. Your policy does not provide guaranteed replacement cost protection.
Other items to look for in your guaranteed replacement cost policy. Does it include a “building code endorsement? A building code endorsement guarantees to rebuild your home by the current building codes - not by previous building codes, an important detail to know. So be careful, especially when you run into a too-good-to-be true low cost policy. Make sure you read the fine print.
The best way make sure you’re getting the most for your money is to compare policy cost with several insurance companies at least once a year. Because policies are constantly changing. Other issues to consider? Should you buy depreciated or full replacement cost personal property insurance? Let’s take a few seconds to examine both to see which one might best fit your needs.
Depreciated replacement cost personal property insurance is the replacement cost of an item minus accrued depreciation (or the loss of value since you purchased it). And of course, full replacement cost personal property insurance is the cost of fully replacing the loss of an item. The choice you make or fail to make can determine the cost of your policy. So go over these points with a qualified insurance professional. With insurance, you get what you pay for. To fully protect yourself without over-paying for insurance you don’t need , you must make it a point to stay informed.
4. Your policy deductible is too low.
This is one of the quickest ways to reduce the cost of your policy. To assume more risk will save on your monthly premiums. By raising your deductible from $250 to $500 can save you thousands of dollars a year. Plus it could make you less vulnerable to price increases should you file a claim.
5. Your policy does not adequately cover your valuables (jewelry, silverware, furs, etc.)
Most people assume their standard home policy covers the entire cost of their valuables. For instance, their jewelry, furs, antiques or other valuables. This is a mistake most homeowners make. Most standard policies won’t cover the full value of most expensive items. Make sure you check with your insurance agent for further details.