What Are the Most Common Home Insurance Shopping Mistakes?
Not all cheap quotes are bargains; some come with higher deductibles, less water-damage coverage or less-than-stellar claims processes.
Learn seven home-insurance shopping mistakes that could affect claims, questions to ask before accepting a home-insurance premium and what to consider when comparing home-insurance options.
1. Focusing Solely on Price
Also consider: Can you report a claim at any time of the day or night? If the contractor is recommended by the insurer, will repair quality be guaranteed? How will disputes be resolved?
Reviewers’ customer-service ratings are subjective, so look at policy terms first, but insurers’ claims handling can make or break a policy’s real-world value. Saving $150 in annual premiums won’t seem so good if it comes with a $2,500 water-damage deductible. Some less-expensive policies lack endorsements offered by others or settle damaged belongings at actual cash value rather than replacement cost.
Make sure you’re comparing apples-to-apples coverage, including limits and endorsements, then compare costs.
2. Failing to Consider Deductibles and Coverage Limits
While you can increase your deductible to reduce premiums, you’ll pay that deductible in the event of a covered claim. Can you afford it out of pocket?
Certain types of losses, such as water, earthquake, wind or hail, can have their own dollar or percentage deductibles, which vary by insurer and geographic location.
Review your policy to determine if it has sublimits. Common examples may include jewellery, bicycles, business property and collectibles. Having a high contents limit doesn’t increase the sublimit.
Read More: Read the Guide to Choosing a Home Insurance Deductible
3. Overlooking Important Policy Exclusions
Fire, including wildfires, is typically covered by a standard home insurance policy. Settlements depend on policy terms, cause and coverage limits. Flood, sewer-backup and earthquake insurance may be available for an additional premium.
Damage from wear and tear, deterioration, rodents, insects or intentional acts is typically excluded.
Ask about water damage, specifically overland water, sewer backup, sump-pump failure, seepage, burst pipes and leaking roofs. Similar-looking damage can be treated differently based on the source of the water.
Read More: Compare Broad and Comprehensive Home Insurance
4. Underestimating Your Home’s Rebuilding Cost
Guaranteed replacement cost or extended replacement cost, where applicable, may not apply if the policy is issued using inaccurate information or renovations are not added to the policy. Provide your representative with accurate information about your home.
Rebuilding cost is not the same as the assessed or market value of your home. It is an estimate based on the type of construction, square footage, renovations, labour, materials, access, demolition, debris removal and required code upgrades.
Read More: Read the Guide to Dwelling Coverage
5. Failing to Update Coverage as Needs Change
Let your insurer know if substantial changes occur to the property. Changes might include extensive remodelling, renting out the house, leaving it vacant, conducting business from the home, adding a wood stove or adding a pool. Do not wait until renewal to notify your insurer.
Keep copies of receipts and take dated photos of major improvements and expensive purchases.
Read More: Use the Home Insurance Renewal Review Guide
6. Missing Out on Potential Discounts
Look at the net cost to make sure you’re actually saving money when using discounts. For instance, while some insurance companies will reduce your premiums when you combine your home and auto insurance, it may be cheaper to keep them separate.
Other ways to lower premiums may include a qualifying alarm system, a higher deductible and paying annually instead of monthly.
7. Comparing Quotes Without Comparing the Policy
Ask about the range of insurance companies a broker or agent represents, how they’re paid and what kind of service you would receive after purchasing the policy.