To err is human, and even experienced homeowners can make mistakes that cost them a lot of money in the long run. One area where people seem to have the most trouble is with their homeowners insurance policies. Insurance is often littered with complex phrasing and terminology. Obscurity, when coupled with boring passages, means that the average homeowner doesn’t fully understand their policy. To help protect your home for years to come, make sure to avoid the following insurance fiascos that could cost you a lot of money years down the road
Failing to Insure Your Home for the Cost of Rebuilding
A lot of people make the decision to insure their home for its real estate value. But the problem is that housing markets fluctuate. And once prices go down and the housing market enters a lull, you could lose a lot of money in the event of damage. Instead, it’s better to get an insurance policy that was created to cover rebuilding costs, so that your insurance is independent of the current market price of your home.
Using Price as Your Only Determinant
Some people also make the mistake of trying to find the cheapest policy. While it’s generally true that most insurance companies are going to offer competitive prices, you also want to make sure that you’re fully covered. Do a little research before jumping into bed with an insurance company. You’ll want to check for customer complaints online, and see if they’ve got a good rating with the Better Business Bureau.
Opting Out of Flood Insurance
Most standard homeowners insurance policies don’t include flooding insurance. Many private insurance companies offer flooding insurance, and you can also get it from the NFIP (National Flood Insurance Program). Even if you live in a low risk area, even the small possibility of flooding means you need to be protected. Floods aren’t always caused by an overflowing river, either. Sometimes melting snow and heavy rains in the spring can cause an area to flood.
Opting for the Smallest Amount of Insurance Possible
Some people try to get away with the smallest and cheapest homeowners insurance policy they can find. But this is a huge mistake, because there are likely a large number of catastrophic damages that your home isn’t protected against. In the end, it’s a judgment call by the homeowner. But in the case of insurance, the “less is more” mentality just doesn’t hold up.
Failing to Get Renters Insurance
Renters insurance helps to cover personal possessions. In addition, it will help pay for other living expenses, such as rent, if your home becomes unsuitable for living. For example, a disaster like a fire could force your family to seek shelter elsewhere, at least until the damages have been repaired. It may seem like a small matter, but having funds to pay for living expenses can make a world of difference after a disaster strikes your home.