7 Common Home Insurance Buying Mistakes
Buying a new home? Congratulations! One of the things you’re going to need, and your mortgage company will require, is homeowner’s insurance. Buying an insurance policy is as important as selecting the right home for your family. There are a lot of details you need to be aware of. The decisions you make will impact what happens when disaster strikes.
When it comes to buying a Massachusetts home insurance policy, things aren’t always cut and dry. Take a look at these common mistakes so you can avoid problems down the road.
Basing Your Decision on Price Alone
Cheap insurance coverage isn’t always better. Remember, you get what you pay for. What you need more than a low price is insurance coverage that will protect you in the event of a storm, fire, or theft.
Buying the Wrong Type of Policy for Your Situation
If you’re going to live in this house with your family, you need at least a standard homeowner’s insurance policy. However, if you’re going to rent the home out to someone else, you’ll need a landlord insurance policy. Both policies cover different things. Make sure you know what you’re getting.
Thinking Flood Insurance is Included
Homeowner’s insurance doesn’t include flood insurance. You’ll need to purchase this as a separate policy through the National Flood Insurance Program (NFIP). Your insurance agent can help you with this.
Not Knowing What’s Excluded
Every insurance policy has exclusions in it. You need to read the fine print and ask questions so you understand what your policy covers. For example, mold and sewage back-up aren’t included in standard homeowner’s insurance policy.
Choosing the Wrong Replacement Options
When you purchase an insurance policy, you’ll have two choices: actual cash value or replacement cost. Most of the time, you want to choose replacement cost so that even if your couch was 10 years old and worth about $50, you’ll receive enough money to buy a new couch. Cash value means you would receive the $50, which won’t even buy a side table for your living room.
Underinsuring Your Home
Your mortgage company will require that you insure your home for at least the value of the mortgage. Eventually your mortgage will be less than your home’s value. Make sure your insurance coverage is enough for the value of your home and belongings, not just your mortgage.
Lowering Your Costs by Eliminating Coverage
Insurance costs are a source of frustration for many people, but the worst thing you can do is eliminate necessary coverage in order to save money. Instead, raise your deductible, especially if you rarely file a claim. You’ll feel the savings without getting rid of the coverage.
Insuring your home doesn’t have to be a source of stress, especially while you’re going through the home buying process. Make sure you understand what a standard policy covers and ask plenty of questions when you talk to an insurance agent.