Avoid Home Insurance Mistakes and Save Money

by Ryan Yates

It’s important to be covered when a disaster occurs.

Although it may be tempting, homeowners shouldn’t rely on cutting home insurance costs to save money– it could come back to bite you. Maintaining the right coverage could end up saving you thousands of dollars in the long run.

Price Alone is No Way to Shop

You’ve heard it over and over, if you choose an insurance company based on the lowest price, you’ll eventually lose your savings when it’s time for your insurance company to come through for you. Never select an insurance company based on price alone.

It is important to conduct a home insurance comparison based on prices and features, but you should choose a company with competitive prices that is also financially sound and provides good customer service. Check the financial health of a company with independent rating agencies and ask friends and family for recommendations. You should select an insurance company that will respond to your needs and handle your claims fairly and efficiently.

Value vs. Rebuilding Costs

Insuring a home for its real estate value rather than for the cost of rebuilding is an area that gets a little fuzzy when deciding on what amount of coverage you need. When real estate prices go down, some homeowners try to save money by reducing the amount of insurance on their home.

But home owners insurance is designed to cover the cost of rebuilding, not the sales price of the home. Make sure that you have enough coverage to completely rebuild your home and replace your belongings in the unfortunate event of some disaster.

The Right Deductible

I love playing the deductible game. When my wife and I were first married, we went back and forth over which medical coverage plan we should sign up for. A higher deductible meant a lower premium, and a lower deductible meant a higher premium. Since we were young and in good health, we decided on the low payments.

You can find similar ways to save money by choosing a higher deductible on your home owners insurance plan. Of course, this all depends on your house. If it’s old and falling apart, you might want higher payments so your deductible will be low.

But if your house is in relatively good shape and in a relatively low-risk area of the country, you might want to think about increasing your deductible to save money on your monthly payments. In some cases, an increase from $500 to $1,000 deductible could save up to 25 percent on your premium payments.

Dropping Flood Insurance

Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. Many homeowners are unaware they are at risk for flooding, but in fact 25 percent of all flood losses occur in low risk areas.

Before you drop flood insurance, check with the NFIP about whether your home is in a flood zone. If so, consider keeping the coverage. No, you won’t be saving money on a monthly basis. But is you’re house ever has flood damage, you’ll be thankful you kept the coverage,a less risky area.

If you are already living in a flood zone area, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance.

Neglecting Renters Insurance

A renters policy covers your possessions and additional living expenses if you have to move out due to a disaster. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.

A better way to save is to look into multi-policy discounts. Buying several policies with the same insurer will generally provide surmountable savings while keeping you safe from unforseen circumstances.

It’s true that not all of this advice will turn into immediate savings. But sometimes, you can save the most money by keeping your most expensive investments and possessions adequately insured.

Photo By horslips5

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