The 5 Worst Insurance Mistakes We All Make
When Buying HOME INSURANCE
We all can’t be experts in everything and we don’t know what we don’t know. These clichés are just as true for home insurance as for anything else. I have been selling insurance for a long time. I take pride in making sure my clients are adequately and knowledgably protected against loss of their home. The purpose of this article is to help you avoid common Home Insurance Mistakes and misconceptions. The mistakes in this article are the ones that I have seen people make most often. I hope it helps educate you so you can make the best decision regarding your home insurance.
#1 Home Insurance Mistake:
Not understanding what insured to full replacement value actually means.
The first mistake we all make when buying home insurance is accepting that our home is insured to full replacement value without understanding what that actually means. Today’s climate in California is very different than just a few years ago. Who would have thought that California brush fires would have taken over as our greatest concern for insuring a home. Just in case you were not aware, in August alone we have currently seen 8 fires, and we are barely half way through the month. The Dixie Fire, the Caldor Fire, the Glen Fire, the Bell Fire, the Walkers Fire, the Monument Fire, the Antelope Fire and the River Complex fire have all wreaked havoc across the state.
Californians currently face extremely inflated costs for debris removal and home rebuilding after a total loss from a brush fire. So the real endeavor is to make sure your home replacement insurance will actually cover FULL replacement of your home with all the related expenses. Your home insurance policy should cover reasonable loss of use while being rebuilt, as well as, replacement of personal property. You have to realize that you will literally be starting over and that this is one of the worst home insurance mistakes you could make.
Mistake #2:
Going with the lowest deductible and filing small value claims.
Home deductibles lead us to our second worst insurance mistakes we all make; most people want to go with the lowest deductible and will file a claim for $200 more than the deductible. This can be a bad strategy. Claims on your records can follow you for up to 7 years even when switching carriers. One claim might be acceptable when shopping around for a new policy. But, you should avoid having two or more claims on your record in the past seven years. That likely will cause you to have great difficulty in getting coverage. Additionally, there’s a good chance it will be at a high price. I suggest raising your deductible and considering your home coverage as protection against catastrophic loss. The last thing you want is to have your coverage cancelled or your premium quadrupled due to a history of small claims.
Mistake #3:
Misunderstanding the value of bundling discounts.
The third worst mistake we all make is misunderstanding how bundling discounts work and why they matter. Companies prefer to do business with preferred customers. These customers will accept that sometimes their auto, or umbrella, or home might be a bit more for one than if they’d shopped every carrier for lowest price. Companies value these clients who will look at the bigger picture and compare as bundled accounts rather than just the individual parts. For that loyalty they will give extreme discounts with more favorable underwriting. They often consider a client as a whole package even if one part represents an above average risk and they will be less inclined to cancel if you are the unlucky one who, with reason, must file several claims.
Mistake #4:
Focusing too much on the lowest premium and undervaluing what a good agent can accomplish for you.
The fourth mistake we all fall into is focusing on the lowest premium. It’s a mistake to undervalue what a good agent can accomplish for you. Insurance will always seem like just another bill if you don’t have a good “quarterback” for an agent. Their job encompass much more than just telling you what you want to hear. Continually adjusting coverage because you found a quote somewhere else for $10 cheaper is not a good use of your agent’s expertise. Your agent should take the lead and GUIDE you to success in protecting your home. The day may come when you need the coverage that your insurance agent carefully customized to meet your specific needs. You won’t be upset that you paid $10 more. But, if your coverage planning just encompassed finding the lowest premium, you may be extremely disappointed when you find it doesn’t adequately cover your loss. This can be one of the most costly home insurance mistakes you could make.
Mistake #5:
Not asking questions about the insurance you’re purchasing.
The fifth mistake that so many people make is not asking questions about what they are purchasing. It’s amazing that many insurance agents don’t explain policy coverage and why certain endorsements and/or limits for coverage are important. YOU are the one ultimately responsible for what insurance coverage you choose to protect home. So be confident that your agent tells you what you NEED instead of what he/she thinks you will be willing to pay for. These are not always the same, but it’s important that you are presented with, and understand, the prudent way to protect your home and given the chance to make your own choice. Underinsuring, or insuring incorrectly, can absolutely devastate your finances when you need help the most. So be sure to ask questions about policy details that you don’t understand.
If you have any questions about home insurance, please don’t hesitate to contact Chris Wilson at (619) 980-7263. He will be happy to help you understand the coverage requirements and options you have in insuring your home.
