As a homeowner, you are responsible for protecting your investment, and homeowners insurance plays a critical role in protecting your property. However, many homeowners unknowingly put themselves at risk by overlooking common insurance gaps. This article looks at eight mistakes to avoid to ensure you and your home are properly protected.
1. Overlooking Additional Living Expenses
In the event of a covered loss, homeowners often overlook the potential financial burden caused by the need for temporary housing and additional living expenses. Make sure your insurance covers these costs to help you maintain your standard of living while your home is being repaired or remodeled.
2. Underestimating Replacement Costs
It is common for homeowners to underestimate the cost of rebuilding or repairing their homes after a natural disaster. Homeowners may base their coverage on the property's market value, which doesn't always align with the actual rebuilding costs. To avoid this gap, regularly reevaluate your coverage to account for construction cost changes and property values.
3. Underestimating the Value of Personal Property
Homeowners insurance extends beyond the building itself; it also covers personal belongings. However, many people underestimate the value of their possessions or overlook certain valuable items. Without adequate coverage, homeowners risk having to pay to restore high-value items on their own in case of fire, theft, or vandalism. Take inventory of your belongings and ensure your policy provides adequate coverage, considering items like jewelry, electronics, and artwork.
4. Failing to Update Coverage After Home Improvements
Home improvements can increase the value of your property, but failing to update your insurance coverage accordingly can lead to gaps in protection. Whether you have added a new room or installed expensive appliances, let your insurance company know as soon as possible so they can adjust your coverage to ensure you are adequately protected.
5. Not Understanding Liability Coverage
Liability coverage protects you if someone is injured on your property. Many homeowners underestimate the importance of this coverage, leaving themselves exposed to legal and financial repercussions. Make sure your policy provides adequate liability coverage.
6. Being Unaware of Natural Disaster Coverage Gaps
Certain natural disasters, like floods and earthquakes, are typically not covered by standard homeowners insurance. To protect against flooding, homeowners must purchase a flood insurance policy. Windstorms and hail can cause tremendous damage to your home and without the right type of homeowners insurance or policies in place, you’ll have to pay for the damages out of pocket. Neglecting to secure additional coverage for these specific events can leave homeowners vulnerable. Evaluate the risks in your area and consider supplemental policies to address potential gaps in protection.
7. Forgetting to Reassess Coverage Regularly
Homeownership involves changes over time, from property value fluctuations to lifestyle adjustments. Failing to reassess your coverage periodically can lead to gaps. The best way to avoid potential insurance gaps is to review your policy regularly with your insurance provider to ensure it meets your current needs. During your coverage review, your insurer will review the type of property, location, and any recent changes made to the property, such as renovations or the purchase of high-value items.
8. Disregarding Sewer Coverage
It may seem that your homeowners insurance would cover a sewer line backup or a pump failure, but these issues also require separate coverage. A sewer backup can cost homeowners several thousands of dollars. Water backup coverage options are often available to ensure you have enough coverage in the event of a major drainage problem.
A homeowner's insurance policy protects your investment in case of an unexpected event and ensures financial stability. By avoiding these eight common mistakes, you can improve coverage and enjoy better peace of mind as a homeowner. Communication with your insurance provider is crucial to addressing your changing needs and maintaining comprehensive coverage.