In many areas, you can’t purchase a home without proof of insurance. For many people, this strict regulation gives them a false sense of security. It’s important to remember that just because you have insurance, doesn’t mean you’re covered.
There are a lot of little mistakes that can cost you big if you don’t catch them when it comes to insurance. Here are some of the common mistakes to avoid when purchasing a home.
If something happens to your home, you can rest easy knowing that your insurance will cover it. That is, unless you’re underinsured. Being underinsured happens more often than you’d think, as many residents who lost their homes to the California wildfires are now experiencing. There are so many people affected by this issue that they’re working with lawsuit attorneys to get that money back.
Not only does not having adequate insurance leave you high and dry in the event of a disaster, but it can also impact your future insurance policies. You may be unable to get coverage again if the insurance company determines that the location is the issue or they could drastically increase your rates. When calculating how much insurance you need, consider not only what’s owning on the mortgage, but your total price with the down payment and what it would cost to rebuild.
In a small town in Canada, there was recently a flood. A local insurance company that had their offices in the basement of an office building bore the brunt of it. Ironically, they did not have flood insurance.
Not having flood insurance is the norm in most insurance policies, and the people holding the policy are often none the wiser. Don’t assume that you’re covered for all sorts of disasters; take time to understand your policy and add coverage as needed. If you’re in a low-lying area or in a quickly developing area where the water system might be worked on frequently, invest in flood insurance. For the latter, you may want to ensure that the insurance you choose covers sewage backups as well.
Mold is another thing that usually isn’t covered in basic insurance policies that most people don’t consider. If you live in a dry, hot area it may not be a concern. If, however, you live in a damp area, you might be susceptible to mold.
It’s important to think about coverage you may need now that you didn’t previously. Consider the major hurricanes in recent years, such as Hurricane Sandy, and contact your insurance provider to see what your options are.
You should always read the fine print of your insurance paperwork before you sign. Don’t assume that you have a single, flat-rate deductible for everything; look at the fine print and see if it varies depending on the claim. Don’t even assume that your insurance provider included all the coverage you want in the policy. If you added something on after your initial conversation, they might have forgotten to add it.
When you sign your insurance policy, you’re indicating that you not only agree to the terms, but you’ve read and understood them. This can make it very challenging to come back and get compensation, even with a conversation paper trail. Read the fine print and ask questions before making it legal.
In addition to insurance, you need an emergency savings fund and a contingency plan. Even with great coverage, you may not be able to submit the claim and receive compensation for some time following a disaster. This might mean having to buy new clothing and paying for a hotel out of pocket.
Take the time to comprehend your coverage and develop an emergency savings fund. Being vigilant is the only way to truly protect your assets.