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Top 5 Common Mistakes When Buying Home Insurance

Top 5 Common Mistakes When Buying Home InsuranceFamily homes are the largest asset of most American households, typically accounting for nearly one-third of all wealth. We all know we need to protect this asset with home insurance, but many Americans don't understand how insurance policies work. Unfortunately, that lack of knowledge can lead to mistakes like these.

They Decide on Price Alone

When you go to the store, there's nothing wrong with choosing the cheapest eggs or ketchup. Aside from minor differences, the products are essentially the same. Home insurance is much more complex, so making a decision based solely on price is problematic.

Cheaper policies are often quite limited and may not provide the type or range of coverage you need. A cheaper package may be less flexible, and processing times may be lengthy. Compare the features of a variety of policies when you're gathering insurance quotes to determine the best home insurance package for you.

They Underinsure

A startling study found nearly two-thirds of American households are underinsured. On average, underinsured households can afford to rebuild only 81 percent of their homes. Should your home be devastated by a natural disaster, could you afford to cover the shortfall? Get a formal appraisal of your home and belongings to ensure your insurance coverage is adequate.

They Assume They're Covered For Certain Things

Many Americans mistakenly believe they're covered for any damage sustained in a natural disaster, but in many cases, you need to take out additional coverage for flood and earthquake protection. It's important to know what you are covered for and what's excluded, so you can decide whether it's worth paying more for extra protection. 

They Misunderstand Their Deductible

It's a mistake to believe that when you make a claim, your deductible will be the same flat amount at the time you signed up for your policy. While this is true in most cases, when named storms like hurricanes or cyclones hit, the deductible often converts to a percentage. Because of this, it's not unusual to face a $15,000 deductible for the windstorm damage you sustained on your $300,000 home.

If your household couldn't handle this unexpected expense, it's worth asking your insurance company whether they have different deductibles depending on the cause of damage. You may need to pay more for a policy with a flat-rate deductible, but it could save you from hardship in the long-term.

They Don't Update Their Policy

Many Americans set up then forget their home insurance policy, but this can be a costly mistake. Your remodeled kitchen, the security system you installed, and the extension you built for your growing family will all impact your home's value. Injuries visitors sustain from dog bites are also usually covered, but only if you update your policy when you get Fido.

Get in touch with your home insurance provider whenever you make changes to ensure your policy accurately reflects your property's current state. 

Be aware of these common misconceptions so you can avoid making costly mistakes with your home insurance.

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