The world of insurance can be confusing and intimidating to those who are not familiar with it. People often make costly mistakes when purchasing home insurance. By following a few simple guidelines, one can avoid making these common mistakes.
1. Not Researching Company
Insurance companies vary in their financial solvency and their claims paying process. It is important to research a potential insurer to ensure that it has the money to pay claims. Unfortunately, instances of insurance company insolvency have left consumers with unpaid claims. In addition, some insurers have cumbersome claims procedures that cause undue stress for the insured.
Invest time into researching any company with which you may do business. Companies are rated by organisations such as A.M. Best, so verify that the potential company has a good rating. While no company is totally free of complaints about its claims handling, look for a company with few unhappy customers. A quick internet search will show you some of the claims issues that people have had.
2. Not Comparing Agents and Brokers
Although there are companies that sell insurance policies without a local agent or broker, it is most likely that the home insurance policy will be purchased with the assistance of a local agent. Request references from a potential broker and check them. Ask your colleagues and friends for recommendations. It is important to find an ethical and knowledgeable agent or broker who will help you make the right insurance decisions.
3. Not Shopping Around
Rates for home insurance can vary widely for the same coverage, so it is important to shop around. Call several companies or agents to compare rates. When shopping, ensure that you are getting rates for the exact same coverage. It is important to tell the agent the coverage and coverage amounts that are needed in order to get a true comparison.
4. Not Purchasing Insurance to Value
Insurance for homes should be based on the cost to rebuild the home, or insurance to value. This may not be the same as real estate prices especially in an area with declining property values. Most insurance policies impose a claims penalty if the home is not insured to value. The right broker can be invaluable with this process.
5. Buying Solely on Price
In today’s economy, it is tempting to search for the lowest cost insurance coverage, but this could result in a negative financial impact during a claim. To quote one broker, “no one worries about price when there is a claim.” It is not impossible to save money on an insurance policy—just ensure that the savings are appropriate.
Some appropriate ways to save money on premiums are:
*Selecting a higher deductible
*Asking for available discounts
*Upgrade security in the home (burglar alarms, smoke detectors, etc.)
Employing these guidelines can help avoid some of the common and often costly mistakes that are made during the insurance purchase process.