The insurance industry has done a disservice to itself and the consumers.
How you might ask?
By making insurance all about price. We are so price driven that we often fail to make informed or even reasonable decisions about coverage. Think about these four mistakes around homeowners insurance that I have had one or more people ask me to do! Yes my clients have actually suggested these to decrease the overall cost of homeowners insurance and despite the red flags and warnings from me they are often dismissive of the risk.
Because price is the driver – people will agree or do things that ultimately hurts them if they have to file a claim.
Here are four examples:
Underinsuring your house
Insurance experts say failing to have enough insurance to cover the cost of rebuilding your house if it’s destroyed is the biggest mistake homeowners make. I have had more than one client suggest that they would like to purposely underinsure there house! They say things like “where did that calculation come from, I know or am a contractor and can rebuild this house for “x” amount. So I have said things like go ask a local real-estate agent, builder, contractor or building association for the average rebuilding cost per square foot in your area or pay for an estimate from various websites
Once you know what it would cost to rebuild, see if your coverage is close to that figure. If it isn’t, increase your protection.
When estimating your rebuilding cost, remember to add in what you’d pay to replace any special features in your house, such as marble floors or high-end woodworking.
To avoid making this calculation every year, ask your insurer about an automatic inflation provision. Of course, this may raise your premium.
You might also consider instead getting extended replacement coverage which means the insurer would pay up to 125 percent of your policy limit to rebuild your home.
The top of the line protection — and the most expensive option — is “guaranteed replacement cost coverage,” where the insurer will pay to rebuild your home no matter what it costs.
Be sure you’re adequately covered for your valuables, including jewelry, art, antiques and computer equipment, too. Don’t overlook buying extra coverage, known as floaters or riders, for jewelry, electronics or art since policies ordinary limit protection for valuables.
Assuming you have flood insurance
This coverage is not part of a standard homeowners contract. If you live near a lake, river, flood plain or the ocean, you should definitely buy it. (You may be required to have flood insurance in order to get a mortgage in certain places.)
But coastal area homes aren’t the only ones that need flood insurance. Inland areas near water can sustain serious flood damage from ground water too.
Flood insurance isn’t hard to get; it’s a federal program that accepts everybody who wants the coverage.
Thinking you have one, flat deductible
You might believe your maximum out-of-pocket cost would be $500, $1,000 or whatever amount you said when you bought your policy. Wrong.
In the case of named storms, like hurricanes or such major weather events as windstorms and earthquakes, the deductible often becomes a percentage of your coverage. I see this often when looking at declarations pages from other insurance companies. Because we are so price driven insurance agents will raise that to a percentage to lower the premium to get the business. Not only is this unfair to the homeowner it makes it difficult for me to explain the higher price.
As an example, if your house is insured for $300,000, but you sustain damage in a windstorm, you could be socked with a $15,000 deductible when you file your claim.
What should you do?
Ask your agent or insurer if your policy has different deductibles, depending on the cause of damage.
Believing you’re covered for sewage backup
Inquire about additional coverage for protection from mold or sewage backup (which is often a problem in large downpours).
The cost of coverage for sewage backup isn’t terribly expensive, about $40 to $50 a year. It’s worth buying. I add it to every policy and literally make the client tell me to take it off. It is such a common claim.
These are just four little examples that could cost you more than the savings on your yearly premium. Make sure you inquire with your insurance agent and ask these important questions.
Of course you can always call me -- 440-527-0304 or visit our website at http://www.herrholtzinsuranceagency.com/ to get a Free UNBIASED quote!