UPDATED: Mar 13, 2020
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How Can I Avoid Common Home Insurance Pitfalls?
Lots of people make mistakes when purchasing homeowners insurance; this is especially true for first-time homeowners who have never shopped around for a policy before. But whether you’re new to this type of insurance or you’ve purchased similar coverage in the past, there are some pitfalls which can be harder to avoid than others. Let our guide help you navigate these treacherous waters!
Pitfall #1: Understand how Claims and your Deductible Work
Like many types of insurance, maintaining a high deductible can really help make your policy more affordable. And this works in a number of different ways. For starters, it helps share more of the financial responsibility between you and your provider. And insurers usually reward their customers for doing so by lowering their premiums.
Raising your deductible can also help you file fewer claims over the life of your policy. This keeps you in good standing with your provider, while also keeping your premiums affordably low. If, for example, a wayward baseball breaks your window and it costs $500 to fix, but you have a $1,000 deductible, you’re more likely to take care of that expense yourself. But if a hail storm turns your roof into swiss cheese, and costs $15,000 to fix, then it’s much smarter to go ahead and file that claim.
Pitfall #2: Failing to Maintain the Upkeep on Your Home
Many people make the mistake of thinking that their homeowners insurance policy will cover perils which result from normal wear and tear on your domicile. Often, though, this couldn’t be further from the truth. Water damage and mold from a leaky pipe, for example, is expensive to fix and often not covered by your policy. Taking simple steps to keep your home in good working order (or hiring skilled contractors to help you do so) can help you ward off future expensive repairs.
Pitfall #3: Request a Loss History Report of your Home
Hopefully, you take care of this step while you’re still engaged in the home buying process. This can help you identify what, if anything, may be wrong with your home (and what you may end up having to file a claim on in the near future). Homes with a longer loss history will likely cost more in annual premiums, since the likelihood of you filing a claim will be much higher. Requesting a report upfront can help you negotiate a more affordable premium.
Pitfall #4: Failing to Understand What Your Policy Does – and Does Not – Cover
Many people make the mistake of assuming their homeowners insurance policy will cover certain perils that it most certainly does not. Others may skip this process because they don’t think they will ever need to file a claim. But being intimately familiar with the ins and outs of your home insurance policy is essential to your financial protection.
|Named Perils||Open Perils|
|Typically applies to personal belongings. Can include protection against perils such as smoke, theft, fire, windstorms, and more. But if a specific peril is not named, then your claim will not be honored.||An Open Peril list usually applies to your domicile. It explicitly states which claims will NOT be honored due to a specific type of peril. Any claims filed due to perils which are not on this list will likely be honored.|
And keep in mind that most policies are flexible. Just because standard policies, like an HO-3 policy, are commonplace and fairly uniform from state to state doesn’t mean that your coverage is set in stone. You may be able to add certain types of coverage (called “endorsements” or “riders”) for extra protection. Likewise, you may be able to reduce unnecessary coverage for a lower premium. The best way to understand your policy and customize it you your specific needs is to sit down and have a long, thorough conversation about it with your insurance agent.