6 Homeowners Insurance Mistakes
Homeowners insurance isn’t complicated – but lots of people lose track of their coverage needs, because they’re in the same home for so long. That policy that you bought five or ten or 20 years ago may well no longer be adequate to protect you. A fire, flood, wind event, sinkhole or other catastrophic event could still leave you financially devastated, even with homeowners insurance.
Here are some common mistakes people make with their policies.
Inadequate coverage amount.
Although it’s been a rough five years for homeowners, financially, the fact remains that real estate historically appreciates over time, along with inflation. The same is true for construction materials and labor. If your home were to be destroyed, would your insurance coverage cover the cost of rebuilding today? Or is it still based on what it cost to build a home a decade ago?
Remember, too, that the cost of rebuilding a home in place, new, can be very different from the market value of your existing home. Your existing home may have been built with materials and specifications that are no longer available or even legal. It frequently costs much more to rebuild a home in place than to buy the identical home next door. If you want to be able to rebuild, insure for replacement value, not market value.
Inadequate inventory of personal goods
Your homeowners insurance needn’t just protect you against loss or damage to your home’s structure. If your home is destroyed, you may also need to replace its contents, as well: Furnishings, antiques, musical instruments, jewelry, art and collectibles all need to be replaced or compensated for in order to make you financially whole after a catastrophe to your home.
Unfortunately, too many people accumulate valuables for years, but never take an inventory of their property – to be stored offsite – and never update their insurance policies to reflect the value of their property that they have at risk.
They stand to lose tens or even hundreds of thousands of dollars if disaster strikes.
To address this, you may consider using one of several websites available to help you document your property, log the serial numbers, if applicable, and/or photograph your belongings and store it off site, where your inventory list cannot be destroyed by the same hazard that destroys your house. One good example is knowyourstuff.org. Don’t have time? Too busy with work?There are many businesses that will do this job for you, at an affordable cost.
Assuming floods are covered.
They almost never are, in a basic homeowners’ policy. The vast majority of times, hazards that are not roughly equally common across the state are excluded from homeowners’ policies. You have to buy separate flood insurance, either from your carrier or via the National Flood Insurance Program.The same generally applies to sinkholes.
Business Property at Home.
Do you have a home office? Do you use your home to store business inventory or supplies? Check your coverage. Your homeowners policy may not cover these items. In some cases, business operations out of your home could even invalidate your homeowners policy. You might need to plus up your commercial insurance policy to cover business property.
Liability Limits are Too Low
Jury awards are much higher than they used to be. If you haven’t adjusted your homeowners’ insurance liability coverage in a while, you might need to either increase this limit, or buy an “umbrella” insurance policy that covers liability over and above your coverage from other basic insurance policies.
Not owning coverage when you’re renting
Renters can be damaged by fires, floods, thefts and other hazards, too. You could lose everything you own. If a fire starts in your apartment or rented home and you are found negligent, your neighbors or property manager could sue you for damages, too. If you are renting, but don’t have renters’ insurance, you probably need it. It costs less than a pizza, for most basic policies, for a month of coverage.
One of the first things we do with new clients is a review of insurance coverages. Life insurance is vital, of course, for most people with youngsters, and for many older folks, too. It depends on the situation. But homeowners insurance, or renters insurance, and other forms of liability protection apply to just about everyone.