One of the most important investments you can make is in your home, and it makes sense to protect that investment. Therefore, choosing home insurance is a crucial decision. When reviewing your insurance policy, these are a few of the worst mistakes you could make:
Insuring A Home for Its Real Estate Value
The cost of rebuilding a home can be more or less than its market value. If the limit of your insurance policy is based on your mortgage, it may not adequately cover the cost of rebuilding. The amount of coverage you need can be influenced by several factors:
- Home Rebuilding Costs
- Multiplying the local construction costs by the square footage of your home can give you an estimate of the total amount.
- Other factors influencing the price include materials used to build your home, the number of bathrooms and rooms, whether there are additional structures like garages and sheds, and home renovations.
- Valuables You Want to Insure
- There are limits to how much standard homeowners insurance will cover for valuables such as jewelry, silverware, collectibles, furs, and computers.
- If your coverage exceeds your insurer’s limits, you may want to look into obtaining a special personal property floater or an endorsement.
- Additional Living Expenses
- In case an insured disaster, like a hurricane or fire, forces you out of your home, you’ll likely need additional living expenses. These expenses will cover the cost of hotel rooms and food while your house is being rebuilt.
- Amount of Liability Insurance
- Liability insurance will protect you against lawsuits if someone gets injured in your home. It’s recommended that you purchase enough liability insurance to protect your assets, somewhere in the range of $300,000 to $500,000 usually.
Selecting the Cheapest Insurance Company
The insurance company with the cheapest premiums won’t necessarily be the most financially stable to back up your claims. You should do some research by using independent rating agencies or consulting family and friends about their insurers.
Not Buying Flood Insurance
Many homeowners don’t realize that damage inflicted by flooding isn’t covered under their regular homeowners insurance. According to Floodsmart.gov, simply one inch of water can cause $25,000 worth of damage to your home. The average flood insurance claim is nearly $30,000 and doesn’t have to be repaid. In Florida, especially, it pays to have flood insurance.
These are only a few mistakes to watch out for. To further educate yourself on the ins and outs of insurance, visit iii.org, the resource this article is based upon.