You have a right to know you have a right to understand what you’re buying and to make well-informed decisions. Home insurance is expensive and if you get this wrong, it can cost you a lot of money, it could put you and your family’s economic future in jeopardy if you make decisions wrong about this. I’m going to help you avoid the top 10 mistakes and help you to understand your home insurance.
Underinsuring your home to save money
This means you get a lower limit on your house because you’re trying to save money. There are a couple of reasons why this is a bad thing, one is if you have a claim on that house, a total loss on that house, you’re not going to have enough money to fix it. Here’s something you need to understand, we do not insure homes for what it costs to buy them, and the market value doesn’t have anything to do with it. We insure homes for what it costs to rebuild them, why? because whenever something happens to it, whenever it’s either completely demolished, or also just has a partial claim, we’re going to repair it right, we’re either going to repair it or replace it, that’s going to be construction costs.
Construction costs have been rising for the last several years, and they have fluctuated a lot too. We need to make sure that we’re ensuring that the replacement or the reconstruction costs because that’s what’s going to matter. If you under ensure that, you’re not going to have enough money there to rebuild your house, much less repair it, all insurance policies, every last insurance property policy out there has a thing called a coinsurance clause. What that means is, the insurance company is taking this risk for this property for however big it is how many square feet it is, whatever construction quality is, and all these other things, they’re taking this risk on. They’re taking on that whole risk but if you don’t insure it for the right amount, then they’re taking on more risk than they ought to, because of how much they’re getting paid for it. The clause says we’re going to pay you based on how much you did insure, versus how much you should have, if you should have insured it for 200,000, but you insured it for 100,000, that’s 50%, they’re only going to pay 50% on the claim and that could be a really bad day. Make sure you’re insured for the right amount because even if you save 50, 100, couple of $100 on the premium upfront, if you have a claim where you’re short, you’re not really going to be saving money, are you?
Sometimes we just make assumptions and those are always bad because we think we know what we’re talking about and we don’t. If you deserve to know, ask questions, and don’t assume about coverages.
Not understanding the terms
Failing to understand insurance terms. You can simply google all the different insurance terms and understand them. I have videos where I describe insurance coverages to help you understand what you have, and what you’re buying. You deserve to feel comfortable enough with your knowledge so that you know you’re making an informed decision.
Not knowing your risks
This is going to be not understanding what you have in play and not understanding the liability. Part of this is to protect your personal assets, to protect your earning capacity, and to protect the savings that you have. Everybody lives in a flood zone but there are flood zones that are worse than others. Several years ago, there was a lot of flooding down in South Louisiana and in the Baton Rouge area because of excessive rain. There was also a lot of flooding in a lot of Houston areas several years back and some of those zones were not what we’d call flood zones. Now, they are flood zones but they are not high-risk flood zones.
Sometimes we will not understand the terminology that every place is a Flood Zone, it’s just some places it’s less expensive to buy it and in some places, it’s mandated if you have a mortgage, but just because you’re not mandated because of a mortgage doesn’t mean you’re not in a zone where you should buy flood insurance.
Assuming you have a single flat deductible
In the marketplace, especially in the states of Louisiana, Texas, Arkansas, and Mississippi, single flat deductibles are going away, they’re kind of a thing of the past. Typically, you don’t just have a single dollar deductible, some companies will have two different deductibles. Once upon a time, everybody had like $100, $250, $500, or $1,000 flat deductible that applies to everything on your home policy, where typically not the case, sometimes you’ll have that and I call that an AOP, or all other perils deductible, then you have a separate one for wind and hail that will be a percentage deductible, or it may also be another dollar deductible. Make sure that you know some insurance companies just have a percentage deductible that applies to everything.
It is easy to accumulate property over time and then lose sight of how much all those things cost, if you live here in the south, a lot of us have guns, jewelry, and a lot of people acquire a lot of possessions, we have expensive home appliances and gadgets. All these different things that we acquire, cost a lot of money, but we don’t realize it because we buy them over time, right? Or it’s just become such an ingrained part of our life. Don’t underestimate how much your stuff costs.
Failing to understand exclusions
There are exclusions in your policy. One reason for exclusions is, a big incident that they can’t cover, like war, volcanic eruption, or incidents like that. Another one is there’s another type of policy such as auto insurance policy, you don’t cover auto insurance claims underneath your homeowner. Flood insurance, flood is excluded from your homeowner’s policy because there’s a flood insurance program out there for that. Other things are just things that are just natural things that happen like wear and tear, they don’t cover maintenance.
If they’re a good agent, they want to take good care of you, and they care about you. They can’t do their job if they don’t control all those policies, that’s the only way they can do the job right for you. So bundle those policies together with them.
Your Homeowner’s Policy may not cover everything, but we’re here to help you understand it and ensure you are properly informed about the things that are not covered.
Neglecting to bundle your policies
There are a lot of reasons why you need to bundle your policies. One of them is you can potentially save money, even if you can’t save money on it, you may be able to get a single deductible that applies to both your home and your cars. Another reason is that you can get an umbrella policy over those to make sure that you have adequate protection for your assets. Another reason is, your agent is a risk manager for you, he cannot or she cannot do their job, without knowing the full scope of what you got going on. They need to understand and manage those policies for you NOT so they can be greedy, or just have all the dollars.
Choosing the wrong insurance company
This ties back to the previous one and I think really choosing the wrong Insurance Agency is probably a bigger deal. Whenever you do a Google review on insurance companies, you’re going to see a lot of bad reviews because people are not motivated to just go out and just review their insurance company. People are only motivated when something bad happens, whenever they have something that’s not covered or something like that. They’re going to be very slanted, I guess the only time they’re motivated to go and review them. Versus your insurance agency, that’s the people they deal with, they’re more likely to give a good honest review about who that agency is. If you have an agent that has a lot of good positive reviews, they really care about you, they’re going to take care of you, they care about their reputation, and they’re not going to work with insurance companies that are going to do a poor job for you. Sometimes stuff falls through the cracks, or sometimes insurance companies drop the ball, it happens but if you’ve got a good insurance agent, they will step into the gap and be there for you to protect you and take care of you. So make sure that you don’t choose the wrong agent or the wrong company.
Failing to understand your home insurance coverage
Life changes, you go through different stages of life and things are gonna change, you may add on to your house, enclose it, do some sort of upgrades, replace the roof, add a security system, have children or aging parents that come to live with you or that maybe move out. Your insurance company and your insurance agent need to know those things because there may be additional discounts, there may be additional coverages that you need, and there may be additional protection that you may need. At least once a year, you should talk with your agent, and let them know what’s going on in life with you. That way, they can make sure that your coverage is taking care of you. You deserve to understand and you deserve to know because you’re the one paying the bills.
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Beaux Pilgrim, CEO