5 Common Mistakes When Buying Home Insurance

Homeowners insurance is essential for protecting your most valuable asset. However, many people make critical mistakes that can leave them underinsured or paying too much. Here are five common errors to avoid.

1. Underinsuring Your Home

One of the biggest mistakes is insuring your home for its market value rather than its replacement cost. Replacement cost is what it would take to rebuild your home from scratch, which can be significantly different from what you could sell it for.

Tip: Work with your insurance agent to calculate accurate replacement costs, including labor and materials in your area.

2. Ignoring Flood and Earthquake Coverage

Standard homeowners policies don't cover flood or earthquake damage. If you live in an area prone to these natural disasters, you need separate coverage.

Tip: Check FEMA flood maps and seismic activity data for your area to assess your risk.

3. Not Updating Your Policy

Major home improvements, new purchases, and life changes can affect your coverage needs. Failing to update your policy can leave you underinsured.

Tip: Review your policy annually and after any significant changes to your home or possessions.

4. Choosing the Lowest Premium Without Comparing Coverage

The cheapest policy isn't always the best value. Lower premiums often mean higher deductibles or less coverage.

Tip: Compare policies based on coverage limits, deductibles, and exclusions—not just price.

5. Not Understanding Your Deductible

Your deductible is what you pay out of pocket before insurance kicks in. Choosing too high a deductible to save on premiums can be costly if you need to file a claim.

Tip: Choose a deductible you can comfortably afford in an emergency.

Conclusion

Taking the time to understand your homeowners insurance and avoid these common mistakes can save you thousands of dollars and provide peace of mind knowing your home is properly protected.