Mistake #1: Insuring a home for its real estate value rather than the cost of rebuilding. When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding and not the sales price of the home.
You may know me as a professional speaker. You may also know me as an Insurance Agent of 23 years. I wanted to share a post from my dear friend in Alabama, Mike Coleman. Take a read, feel free to contact him directly at 800-308-5220. This information is applicable to anyone, so make sure you share with EVERYONE!
FIVE BIG INSURANCE MISTAKES
Insuring a home for its real estate value rather than the cost of rebuilding. When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home.
But insurance is designed to cover the cost of rebuilding and not the sales price of the home. You want to have enough coverage to completely rebuild your home and replace your belongings.
A better way to save: take a higher deductible. If you raise your deductible from $500 to $1,000, for example, you could save up to 25%.
Selecting an insurance company by price alone. You want a company that is financially sound with good customer service. Check the financial health of an insurance company by using ratings from independent rating agencies. A better way to save: ask friends, relatives and business colleagues for recommendations. You want a company that will respond to your needs, answer questions and handle claims fairly and efficiently.
Dropping flood insurance. Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the federal government’s National Flood Insurance Program (NFIP). A better way to save: Before purchasing a home, check with the NFIP to see if the home is in a flood zone. It might be better to purchase a home that is in a less risky area. If you are already living in a flood zone area, look at mitigation efforts that can reduce your risk to flood and purchase flood insurance.
Only purchasing the legally required amount of liability protection for a car. In today’s litigious society, buying only the state minimum means you’ll likely pay more out-of-pocket in a crash, and these costs could be steep. A better way to save: Consider dropping collision and/or comprehensive coverage on older cars. As a general rule, it’s not cost-effective to pay for comprehensive or collision coverage on a car worth less than $1,000. Instead, use the money you saved to up your liability limits. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident since accidents may cost far more than the minimum limits mandated by most states.
Neglecting to purchase renters insurance. Renters insurance covers your possessions in the event of a fire or other disasters. It also provides additional living expenses should you have to move out. Most importantly, it provides liability protection in the event someone is injured and sues. A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto and life will generally provide savings in the form of a discount.
Peace, Love and Gumbo~