Home Insurance Mistakes That Can Seriously Cost You
One of the biggest monthly expenses that come with buying a house is homeowners insurance which keeps us under a protective umbrella in case of a burglary, fire and other mishaps that can cause financial ruin.
So, as long as you’re paying your monthly premiums for the home insurance, you’re protected, right? Well, in most obvious cases, the answer is always yes. However, there are a few common mistakes homeowners make that can prevent them from filing an insurance claim.
Mistake # 1: Underinsuring your house
According to experts, if you aren’t choosing an insurance plan that covers the cost of rebuilding the home in case of fire or destruction, you’re making the mistake of underinsuring your property. One recent study by United Policyholders showed that more than two-thirds of homeowners in the United States have home insurance policies that provide inadequate coverage. Most of them have bought plans worth 80 or 90 percent of their home value to cover just the mortgage, but not the cost of rebuilding the house in case of an accident.
To make sure that you’re sufficiently insured, first calculate the cost of rebuilding the house by using an online cost estimator. You can even ask a builder or real estate agent for an estimate of how much it would cost to rebuild a square foot in your neighborhood.
Once you have a number to work with, check with your insurance provider to see if your current plan provides coverage that comes close to that figure. If coverage is less than the estimated cost, it’s time to increase protection which often comes with an increase in your premium. You can also ask your insurer to give you an automatic inflation provision that adjusts the rebuilding cost every year without calculating it all over again.
You can also choose a special guaranteed replacement coverage, which often costs higher premium but offers full protection against accidents and disasters, and makes sure that your insurer pays for the entire home rebuilding process no matter how much it costs.
Mistake # 2: Not Having Flood Insurance
There are certain things your standard homeowner’s insurance plan won’t cover, and flood insurance is one of them – unless you live close to a river or an ocean where it is often mandatory to get flood insurance before applying for a mortgage.
But even if you don’t live in a coastal area, it is wise to protect your home against flood risk, because even inland areas can sustain damage from floods in case of storms and hurricanes. This was seen during Hurricane Sandy in 2012 that caused flooding in inland cities like New York, New Jersey, and Vermont.
Luckily, it’s not very difficult to acquire flood insurance for your home under a federal program. Depending on the amount of coverage you’re looking for and the area you live in, expect to pay anywhere between $55 to $8,000 per year.
Mistake # 3: Underestimating Your Out-Of-Pocket Costs
What’s the maximum amount that you could pay in deductible in case of an accident or a disaster? If you’re thinking something along the lines of $500 or $1,000, you’re wrong. Most insurance providers will charge you a deductible as a percentage of your home’s insured value, and the amount often varies with the type of disaster you’re filing a claim for.
For example, in case of a flood, your insurer may require you to pay up to 5 percent of your coverage whereas in case of an earthquake, the deductible amount can be as high as 15 percent of insured value. This may not seem like a lot in the beginning but if you have insured your home for $300,000 and the property gets struck by a windstorm, you’re likely to pay up to $15,000 in out-of-pocket cost in order to file a claim.
To make sure that you’re prepared for any unexpected costs, talk to your insurance agent about deductibles for different types of damages and set up an emergency fund to cover the expenses in case of a fire or natural disaster. You can even ask your insurance company for a flat-rate deductible plan so that you know how much you’re expected to pay at the time of making a claim.
More in Insurance
Tips to manage Stress and Be Careful Once Offices Resume Post Lockdown
There would hardly be anyone who’d not be excited to get back to work after the Coronavirus lockdowns are lifted. It’s...June 27, 2020
If You’re Struggling to Pay Rent or Mortgage During COVID-19, These Tips Will Definitely Help You Out
Let’s face it- when talking about monthly bills, your rent and mortgage bills sit right at the top of the list....June 26, 2020
Struggling to set your Career straight? Take a look at These Tips that are Sure to Help
The pandemic has created havoc in many industries, and thousands of people are left without jobs. If not entirely out of...June 26, 2020
How to Build a Successful Career in Event Management – Expert Tips
Unlike earlier times, today’s younger generation has a variety of career choices. Current opportunities are usually based on either the global...June 23, 2020
Struggling to Figure Out Your Next Career Move? Here’s How You Can Keep Your Professional Progress On Track With These Expert Insights
We know that planning your next career move is the last thing on your mind right now. With companies closing and...June 23, 2020
Financial Mistakes Most Millennials Regret Making During College
Getting ready for college could be one of the highlights of your life, personally and professionally. A lot of opportunities open...June 17, 2020
Here’s How Americans Are Spending their $1,200 Stimulus Checks
When the Great Recession wreaked havoc in the economy in the late 2000s, Americans received stimulus checks from the federal government to help...May 20, 2020
Students Looking for Extra Income Can Apply for These Three Online Jobs
Students usually have limited budgets. And with unexpected expenses threatening to mess with those funds, most of them are now considering...May 15, 2020
The Five Most Important Things You Need To Consider When Getting a Personal Loan
A personal loan means borrowing from a lending entity, may it be a bank or some other credit provider. It’s...May 15, 2020