For homeowners tight on cash, there are plenty of ways to reduce costs. But insurance isn’t the first place that should be trimmed, experts warn.
“We are all concerned with saving money and it is important to shop around when looking for homeowner’s insurance coverage,” Most insurance agents will agree. “However some people are reducing their coverage or dropping important coverage plans altogether to try to save money and this can leave you dangerously underinsured in the event of a disaster.”
According to insurance experts, when it comes to homeowners insurance, people often make mistakes that leave them underinsured and holding massive bills if something goes wrong.
Shopping the insurance world to find the best coverage for your budget can be tough, but have the right coverage can prevent future financial headaches if something does go wrong.
Here’s a look at the top mistakes home owners make when it comes to their insurance.
Mistake No. 1: Insuring the property for the real estate value or accessed tax value.
Home owners often mistakenly insure their property for its real estate value instead of the cost to rebuild. When real estate prices go down, that enables them to reduce the amount of insurance on their home and save some money.
“You should make sure that you have enough coverage to completely rebuild your home and replace your belongings,” No matter what the real estate market says your home is worth. A good example would be if you took the value of your home, let say $ 250,000 in your current market. The same home on the beach in San Diego may be worth 2 million. Yet to rebuild would be very close.
Mistake No. 2: Not getting additional coverage, ask your agent.
Natural disasters can happen with little to no notice and can have devastating consequences. For example, flood, earthquake and landslide insurance is almost always a separate policy. But can be added on some home policies as an endorsement.
“One of the largest mistakes that homeowners make is assuming that their policy covers their home and belongings in the event of every potential risk – such as earthquake or mold or sewer and drain. “Sadly, many people find out the hard way after a major storm that they didn’t have the coverage that they truly needed.” Most agents say homeowners need to check to see what natural catastrophes are common in their location and make sure they are adequately covered.
Mistake No. 3: Getting rid of flood or earthquake
Super storm Sandy that moved up the East Coast last October, 2013 proved that homes not located in designated flood zones can still experience major water damage.
“Many homeowners are unaware they are at risk for flooding, but in fact, 25 percent of all flood losses occur in low risk areas,” “Furthermore, with the significant snow fall this winter, spring related flooding may be particularly severe, thus increasing the importance of purchasing flood insurance.” You need to buy 30 days ahead of time. You cannot wait till the last minute.
If you live near a fault line you would be foolish not to add earthquake insurance.