5 Costly Home Insurance Mistakes to Avoid

Gavel on pile of money

Last year, in the U.S., the average annual homeowners’ insurance premium was $823. While comparing quotes from several well respected providers can go a long way toward getting you a competitive rate on your home insurance policy, cost shouldn’t be the primary factor in deciding which policy to choose. In fact, a low-cost policy probably doesn’t offer the comprehensive coverage your home needs, and that could end up costing you considerably more in the long run.
Whether you’re buying insurance for your first home or you’re reevaluating a homeowners insurance policy you’ve had for years, be aware of these five costly mistakes to avoid.

Mistake #1: Underinsuring Your Home

More than 60 percent of U.S. houses are undervalued for insurance purposes. That means should they be destroyed beyond repair, the homeowner doesn’t have enough insurance coverage rebuild their house. In fact, a survey conducted by Marshall & Swift/Boeckh discovered that most homeowners only have enough coverage to rebuild 81 percent of their home.

How to Avoid This Mistake
Contact a professional home-replacement cost estimator, and find out how much it would cost to rebuild your house. Expect to pay a few hundred dollars for the estimate, depending on the size and location of your home. Alternatively, you could ask a local builder or contractor the average per square foot cost to rebuild your home, but the figure isn’t likely to be as accurate as one supplied by a home-replacement cost estimator.

Now that you know how much it would cost to rebuild your house, take a close look at your insurance coverage and determine if you need to increase your protection. It’s important you recalculate the cost on an annual basis. Don’t forget to include valuables or any improvements you’ve made during the year, such as upgrading your kitchen countertops to granite.

Mistake #2: Assuming You Have Flood Insurance

In the U.S., floods are the most common natural disaster, resulting in an average homeowner loss of $38,000. Yet flood insurance is not included in a traditional homeowner insurance policy.

Homeowners who live near a body of water are often required to get flood insurance before their mortgage is approved. But homebuyers who live in areas of low to moderate flood risk rarely think about getting flood insurance, or assume it’s part of their homeowners policy, until it’s too late. Tragically, one out of four flood losses happen in low to moderate flood risk areas.

How to Avoid This Mistake
You can’t hold Mother Nature back, but buying flood insurance can cover the cost of repairing your home should the worst happen. Regardless of where you live, it’s a good idea to invest in flood insurance. The good news is, flood insurance is relatively easy to get and usually affordable. You can visit FloodSmart.gov to find out more about your home’s risk, then contact your insurance provider and get flood insurance. Keep in mind there’s a 30 day waiting period from the time your buy the insurance until your coverage begins.

Mistake #3: Not Understanding a Deductible

You might not be aware that your deductable, or the amount you pay before your insurance kicks-in, may increase in certain situations. One of which is in the case of a “named” storm, like 2012’s Hurricane Sandy or a major natural event such as an earthquake.

How to Avoid This Mistake
Take the time to fully understand your homeowners deductable now, and you can avoid huge expenses in the future. Find out if your deductable remains constant, or if it changes depending on the cause of the damage. Be sure to specifically ask your agent if your deductable converts from a flat rate to a percentage of your coverage during a major weather event.

Mistake #4: Thinking Your Policy Covers Mold

Many home insurance policies don’t cover mold damage, and unfortunately removing mold can be quiet expensive. Adding mold coverage to your homeowners’ policy can be a bit pricey, but again, it could save you money in the long run.

How to Avoid This Mistake
Consult with a professional homebuilder or contractor and ask them to assess your home’s mold risk. Chances are if you live in a humid climate your home may develop mold. If you leave your home for an extended period during hot, humid weather, be sure to leave the air conditioner on to help prevent mold growth. Should your home suffer water damage, be sure it is dried out and repaired properly, or mold may grow. Also, newer homes are typically built using mold resistant materials, but older homes aren’t. If you live in an older home, you may want to consider adding mold coverage to your policy.

Mistake #5: Believing You’re Covered for Sewage Backup

Believe it or not, homeowners are usually responsible for maintaining the sewer pipe that runs into their home from the city sanitary sewer main. If this pipe backs up or a toilet overflows, the resulting sewage damage is not only revolting, it can be incredibly costly to clean up if you’re not insured. Sewage backup expenses can range anywhere from $7,500 to $30,000, and most homeowners policies don’t cover sewage backup.

How to Avoid This Mistake
Read over your policy carefully, or call your provider and ask if you’re covered for sewage backup. If you’re not, ask about adding a sewage backup rider to protect your home. You can expect sewage backup coverage to be relatively inexpensive, and well worth the investment.

If you’re unsure about whether or not your homeowners insurance coverage is adequate, or you’re not satisfied with your policy, contact the professionals at Obrella today. We’re happy to help you find the best coverage for your unique needs.

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