Top 5 Mistakes People Make With Homeowners Insurance
Buying homeowners insurance isn’t a one-time decision you can forget about once the policy is in place. Your home, belongings, and lifestyle change over time, and your coverage may need to change with them.
Some of the most expensive insurance surprises come from policies that haven’t kept pace with the homeowner, not necessarily from choosing the wrong coverage initially. Here are five mistakes that can create coverage gaps and unexpected expenses when you least expect them.
Mistake No. 1: Not Updating Your Policy as Your Home Changes
The cost to rebuild your home isn’t the same as its market value, and construction costs can change over time. As Construction Today notes, rising material costs, labor shortages, and supply chain disruptions have affected the construction industry in recent years. Those pressures can also increase the cost of rebuilding your home after a covered loss.
Do home renovations affect insurance? They can. An addition, a finished basement, a remodeled kitchen, or other substantial improvement may increase your home’s replacement cost. Some projects can also introduce new liability or property exposures during or after construction.
Tell your insurance agent about major renovations before work begins, and review your dwelling coverage afterward to make sure it reflects the estimated cost to rebuild your home.
Mistake No. 2: Declining Important Coverage To Save on Premiums
A standard policy doesn’t address every potential loss. Depending on the insurer and property, endorsements or separate coverage may be available for exposures such as water or sewer backup, additional dwelling replacement costs, service or water lines, and valuable items.
Jewelry, art, antiques, and other high-value property can also have coverage limitations under a standard policy. Scheduling valuable articles individually may provide broader protection and higher limits, depending on the policy.
Saving money by declining coverage can make sense only when you understand the financial risk you’re choosing to retain.
Mistake No. 3: Assuming Your Policy Covers Every Type of Water Damage
“Water damage” isn’t one coverage category. A homeowners policy may cover certain sudden and accidental losses, such as water escaping from a plumbing system, while excluding or limiting losses involving long-term leakage, deterioration, neglect, mold, or water entering from outside the home.
Flooding is an especially important distinction. Standard homeowners insurance generally doesn’t cover flood damage. Homeowners can use the Federal Emergency Management Agency’s Flood Map Service Center to better understand flood hazards in their area. Even homes in areas not considered high-risk should consider obtaining separate flood insurance, either through the National Flood Insurance Program or a private insurer.
Knowing how your policy treats water losses before something happens is far better than discovering an exclusion during a claim.
Mistake No. 4: Failing To Tell Your Agent About Changes That Affect Your Risk
Your insurer originally priced and issued coverage based on information about your home and household. Significant changes can affect your exposures, eligibility, or coverage needs.
Starting a home-based business, completing renovations, purchasing a boat or all-terrain vehicle, acquiring certain pets, employing domestic workers, or making other substantial lifestyle changes should prompt a conversation with your agent.
Don’t wait for the annual renewal if circumstances change. A short conversation can uncover an exposure that your existing homeowners insurance wasn’t designed to address.
Mistake No. 5: Focusing Too Much on Price Instead of Protection
Price matters, but the cheapest policy isn’t necessarily the best financial decision. Higher deductibles, lower limits, and fewer endorsements can reduce premiums while transferring more risk back to you.
Home maintenance matters, too. A deteriorating roof, an unresolved leak, or other maintenance issue can eventually contribute to damage that insurance may not cover. Ready.gov also recommends household preparedness measures that can help families protect themselves and their property from disasters.
Homeowners should also think carefully before filing very small claims. Claims history can be one factor insurers consider when underwriting and pricing coverage. It makes sense to discuss the situation with your agent before deciding how to proceed.
Review Your Coverage Before You Need It
The best time to discover a gap in your homeowners insurance is during a policy review, not after a fire, storm, theft, or water loss. Review coverage regularly and whenever you renovate, make a significant purchase, or experience another change that could alter your risk.
Moody Insurance Worldwide can help you evaluate your current protection, identify potential gaps, and consider coverage appropriate for your home and circumstances. Contact Moody to schedule a personalized homeowners insurance review.
About the Author
Christopher Moody is President of Moody Insurance Worldwide, a leading independent insurance agency located just outside Washington, D.C. He has been serving clients in the insurance industry for more than 30 years. Moody Insurance Worldwide offers a wide range of insurance options, serving clients in all 50 states and overseas. Moody specializes in tailoring insurance programs to fit the unique needs of our clients because when it comes to insurance, one size does not fit all.
About Moody Insurance Worldwide
We are a specialized, independent insurance agency that provides all types of personal and business insurance. In addition to essential Property, Liability, and Benefits insurance, we have expertise in Professional Liability, Cyber Liability, Director & Officer Liability, and International insurance coverage.