3 major home insurance mistakes to avoid
Your home is likely your largest financial investment. Ensuring you're adequately covered by your home insurance policy and avoiding these 3 major home insurance mistakes can give you peace of mind if disaster strikes. (iStock)
As of October 2020, the U.S. unemployment rate was 6.9%, according to the Bureau of Labor Statistics (BLS). In April 2020, the unemployment rate reached 14.7%, its highest level since the Great Depression. The Federal Reserve forecasts the unemployment rate will not improve significantly until 2021.
Due to COVID-19, unemployment has become one of the most critical economic issues facing the country. As a homeowner, you may be trying to find ways to save money. Revisiting your home insurance policy to make sure you’re getting the best deal and that your home is properly covered makes good sense.
Avoid these 3 home insurance mistakes
Your home is your largest financial investment. Yet it is vulnerable if left unprotected from theft and vandalism, fire, a natural disaster, injuries suffered while on the property, or some other mishap. Many people think things like this will never happen — until it does.
That’s why it’s important to visit Credible to explore your home insurance options and avoid these three main home insurance mistakes.
- Not having enough insurance coverage
- Not having the appropriate coverage in advance
- Not having natural disaster insurance
1. Not having enough insurance coverage
Underinsuring your home can be a costly mistake. Many homeowners only have enough coverage to cover their mortgage. But if your mortgage or the equity in your home is only worth 75% of your home’s value, you may only receive that amount if it’s destroyed. That may not cover rebuilding.
Likewise, you may have a policy that only covers the current value of your home. But, your home’s current value may not cover the actual cost to rebuild at today’s prices. That’s why it’s important to know what it will cost to rebuild and get coverage close to that amount.
This is also true concerning your personal belongings.
Comparing multiple insurance quotes can potentially save you hundreds of dollars per year. And, it’s so easy to get a free quote in minutes through Credible’s partners here.
Generally, there are two types of coverage—replacement cost and actual cash value.
- Replacement cost value. Unlike actual cash value insurance, when a tragedy happens, replacement cost insurance will replace your belongings at their current value. For instance, if a fire damages your computer, and the cost to replace it today is $1,200, you are paid $1,200, even though you may have paid $1,000 two years ago.
- Actual cash value. Actual cash value insurance will reimburse you for the cash value of your personal belongings. However, your belongings are not worth as much as they were when you bought them because of depreciation, so you are paid the actual cash value at the time the tragedy occurs, not what you paid for them.
DO YOU NEED HOMEOWNERS INSURANCE?
2. Not having the appropriate coverage in advance
Unfortunately, it’s not uncommon to discover that your homeowner’s insurance policy doesn’t cover natural disasters, or only part of the damage is covered. Worse yet, the type of damage you suffer is excluded from your policy.
Most standard policies have hazard coverage, which covers the physical loss and damage to your property and possessions, and liability courage, which covers injuries to people while on your property, like slipping on your front steps.
According to the Insurance Information Institute, standard coverage may also include damage from:
- Explosions
- Riots and civil unrest, vandalism and malicious mischief
- Theft and vandalism
- Volcanos
- Windstorms and hail
- Damage from an aircraft or vehicle
- Fire and smoke damage
- Falling objects
- Lightning strikes
- In-home water damage (from within the home only)
- Snow, ice storms and sleet
You may also want to cover personal possessions like expensive jewelry, musical instruments, cameras, or electronics that may be stolen or damaged. Or coverage for living outside your home while it’s being rebuilt. If someone slips on your front steps, you’ll want to have enough coverage to pay their medical bills.
Having enough insurance is vital. Having the appropriate insurance coverage is just as important. To ensure your insurance is suitable for your circumstances, visit Credible to check out plans, providers, and costs.
HOW TO FIND THE BEST MORTGAGE RATES AND FASTEST CLOSINGS
3. Not having natural disaster insurance
Depending on where you live, you may need flood, earthquake, or region-specific insurance to ensure you have adequate home insurance in the case of a natural disaster. These coverages are not generally standard with most homeowners insurance policies.
Flood insurance is a federal program that accepts everyone who needs coverage, so it’s not hard to get. If you live in earthquake-prone areas, your insurance carrier may also require earthquake coverage to qualify for a mortgage.
Extra flood and earthquake insurance can cost from about $70 to $250 per month on top of your homeowner’s policy, depending on the value of your home and location, according to FEMA.
If you live in an area prone to bad weather or natural disasters, visit Credible to compare home insurance companies and plans.
If you're searching for a new policy, renewing your current policy, or investigating your options as a new homeowner, you may also want to consider if you want coverage not typically standard on most homeowners’ policies. Add-ons to your policy may cover things like termites or other pests, mold, sewer backups, or damage due to lack of maintenance on the residence.
Not sure what type of policy or how much homeowners insurance you need, or to make sure you avoid any mistakes when signing up for a new policy, check out Credible today to explore all of your home insurance options.
RECORD-LOW MORTGAGE RATES WON'T LAST — REFINANCE BEFORE IT'S TOO LATE