Homeowners insurance is a vital safety net that provides financial protection for your home and your belongings in the event of theft or damage. If you have a mortgage, your lender most likely requires you to carry homeowners insurance. Unfortunately, buying homeowners insurance can be difficult and choosing the right policy can be confusing. If you're in the market for homeowners insurance, avoid these common mistakes:
Confusing Rebuilding Costs with Market Value
The amount of your homeowners insurance policy should be high enough to cover the cost of replacing all of your belongings and rebuilding your home in the event of a total loss. However, many people get confused when it comes to the market value of a home compared to actual rebuilding costs. In the vast majority of cases, the market value of a home is substantially higher than the rebuilding costs; when you rebuild a home you don't have to purchase the land again. Don't pay more than you have to for home insurance-- base your policy value on how much it would actually cost to rebuild your house.
Buying a Policy Based on Price Alone
It is natural to want to save some money on insurance, but you should never automatically buy the lowest priced policy. Instead of looking at price alone, you need to think about the value that a homeowners insurance provides. Prior to purchasing a homeowners insurance policy, it is in your best interest to make a list of your needs. Then get quotes from several insurance companies. You can then compare each policy and what it covers and provides in order to select the best policy for your situation.
Neglecting to Purchase Flood Insurance
While most homeowners insurance policies will cover the cost of repairs if a pipe breaks and floods a room in your home, virtually no policies cover flood damage caused by flash floods, storm surges, or extremely heavy rain. In order to have protection from flooding in these situations, you need to buy an additional policy through the National Flood Insurance Program. Speak with your insurance agent-- he or she can assist you in buying government-sponsored flood insurance.
Not Asking About Discounts
Insurers base the premiums they charge on how much of a risk your home is to insure. There are many things that make your home a lower risk, which can result in discounts on what you pay, so make sure to ask about them. Things like a security system, fire sprinklers, being located near a fire department, or installing new locks on your doors and windows are all things that can qualify you for discounted premiums. Contact a na agent for more info.