Proceeds from a homeowner's policy can provide necessary funds to replace your house and belongings. A good policy can also protect against unexpected liabilities. If you're considering a new homeowner's policy (or already have one), watch out for some common pitfalls, including the following:
Inadequate policy limits. Some
homeowners try to lower their premiums by purchasing a policy that doesn't fund
their home's replacement value. That's often a big mistake. If the cost to
replace your home has risen over the years and policy limits haven't kept pace,
you could end up footing the bill for much of the replacement cost (or selling
your property at fire sale prices).
Personal property not documented. If you need to file a claim, an insurance carrier will want solid
evidence that you owned the items being claimed. It's a good idea to take
pictures or videos of all your household goods, and keep receipts of all
expensive purchases. Place copies of the pictures and receipts in a safe
deposit box and at home in a fireproof safe. You might even send copies to an
out-of-town friend or relative. Being able to provide clear evidence of your
personal belongings will simplify the claims process and help ensure that you
get paid.
Valuables not covered.
Check your policy to ensure that expensive jewelry, antiques, and other
valuables are included. If not, consider adding a rider to the policy that
specifically lists such items.
Deductible too low.
Generally, the higher the deductible, the lower the premium. True, in the event
a claim needs to be filed, you'll pay a bigger chunk of the repair or
replacement cost with a high deductible. On the other hand, with a high
deductible you'll generally pay lower premiums each year.
By doing careful research and avoiding some
common mistakes, your homeowner's insurance policy will be affordable and still
provide solid protection should disaster strike.
