Searching for a home insurance policy during the buying process is a no-brainer. We all know that having homeowners insurance is essential when purchasing a home. There are several important notes that many people don’t consider or don’t know to look for though. From natural disasters to personal liability, we’ve gathered several of the worst things you could forget to consider while deciding on an insurance policy.
Is your plan cash value, replacement cost, or guaranteed replacement cost/value? While searching for a home insurance plan, there are three options for coverage. Cash Value plans cover the cost of your house and belongings. These plans take depreciation into consideration which could lower the amount of money in a pay out. Replacement Cost plans cover the cost of your house and belongings at their original value.
Guaranteed Replacement Cost/Value covers the cost to rebuild your home no matter what your policy limit is. Guaranteed Extended plans cover all that plus more than what you purchased. These plans aren’t unlimited with their coverage but much more flexible and generous. If you should ever need to rebuild your home, Investopedia recommends Guaranteed Replacement Cost/Value plans (or extended) because you shouldn’t just be rebuilding your home. You should rebuild with the goal to increase its value.
Are you underinsured? Accepting an insurance plan with a lower monthly payment might seem like you won the jackpot at first. However, when the time comes to cash in on your policy to rebuild and you only receive a fraction of what you need, that lower monthly payment is going to be regrettable. How do you determine if you’re underinsured? According to Forbes, the best way to make sure you’re insuring your home properly is to estimate the cost of rebuilding.
The worst case scenario in owning a home is your home being destroyed. You wouldn’t insure a fraction of your car. You don’t insure half of your body. Why would you only insure a fraction of what your home is worth? You might save money monthly for a while but it’s worth the extra expense when you really need that policy to help out.
Did you factor in natural disasters? Most insurance plans do not include “acts of God” otherwise known as natural disasters like hurricanes, earthquakes, tornadoes, or landslides. However, areas that are prone to these disasters have riders (or add-ons) available to cover your home in the case of one. Some of these plans will only cover roof and structural damage and that’s it. If you want a more inclusive plan, be sure to read the fine print and ask questions to understand exactly what will be covered.
Define what “Flood Insurance” means. Many policies include flood damage due to burst pipes and other household grievances related to water. However, having flood damage from weather like actual floods is rarely included in that typical water damage clause. While choosing a plan, if your area is prone to flooding or if there’s even a slight chance you could experience flooding, check to see what the policy states regarding this occurrence.
If flood damage by weather is not included, refer to any natural disaster coverage you buy. If it’s only included for severe events like a hurricane, you might want to consider adding on a flood insurance policy. Water damage can be brutal and when there’s no ability to drain retaining water, it can cause more issues like mildew and mold. A policy, even a small one, can take some of the pressure off in case of weather-related flooding.
Personal liability for damage or injuries. It’s odd to consider that someone would sue you for something happening on your property. It happens and in the case that it does, your insurance policy can help prevent you from having too many out of pocket expenses. For example, if someone gets a dog bite from Fido, your policy will cover any medical expenses. If someone slips on ice and breaks an ankle, liability helps cover those expenses as well. This also applies to property of guests being damaged while visiting. If someone asks you to take a picture and you accidentally drop their phone and break it, liability coverage can pay for that expense. It’s the little things that you don’t think about but end up costing a fortune.
Does the company have a highly rated and efficient claim response? Just like when choosing a real estate agent and lender, the insurance provider you choose should be great with communication. There’s nothing worse than your house catching fire and not being able to reach your agent for a week. While researching agents, look at their reviews online. See what other people are saying, especially those who discuss needing their insurance agents during an emergency. Note how long it takes the agent to return phone calls and emails. If they’re slow to respond, it might be ok right now but is that going to make things harder when an emergency happens?
Did you read the fine print? Last but hardly least, read the fine print. We cannot say this enough. Read. The. Fine. Print. We don’t care if your insurance agent is Aunt Debbie’s best friend’s daughter-in-law Susan who you can absolutely trust. Read the fine print. If Susan is as trustworthy as her reputation beholds, she won’t mind you reading the fine print for a second. These tiny words will oftentimes list out exceptions to coverage resulting in higher costs for you in the long run should something happen. It’s also a great place for companies to hide loopholes that protects them more than you. So do us all a favor, will you? Read every word before you sign the dotted line. Repeat after us: Read. The. Fine. Print.