In the world of insurance, mistakes can happen. For instance, so many people forget to pay their premiums. In this post, we will focus on blunders that are specific to home and property insurance. Some of them are small things that could lead to inconveniences, but others can cost you!
In this post, Direct-Line Insurance shares some of those mistakes that you need to avoid at all costs and what you need to consider:
Not Correctly Determining How Much to Insure Your Property For
One of the common mistakes happens when the homeowner doesn’t know how to determine how much they should insure their house for. Presently, most home insurance policies in Canada have what’s known as Guaranteed Replacement Cost, which basically means regardless of the Home Coverage amount, the insurance company will pay the cost of rebuilding the house if something happens. For example, if the house is insured for $700k and it would cost $900k to rebuild after a fire, the insurance company will pay for that.
A good insurance broker will use a program to help their customer determine the value of their home. The requirement is that the customer insure their home to the estimated value of their home using that program. If you choose not to insure to that value, your policy will not provide Guaranteed Replacement Cost and will revert to Actual Cash Value which could leave you hundreds of thousands of dollars short if your home burned to the ground.
Also, remember you are not insuring your house for the market value – you’re insuring it for how much it would cost to rebuild it with similar materials.
Not Taking Water Coverage into Account
Home insurance used to be called “fire insurance’ because that’s the most common type of loss. However, with the more frequent harsh storms, one of the most important coverages is water damage. Overland Water or Flood Coverage has been used in the past few years because many homes have been uncovered for decades. Before this, there was just Sewer Backup Coverage that only covered water that comes up because of sewer or stormwater backup, so in case a flood happens, it’s hard to determine whether the water came up from the sewer or the exterior. It’s best to discuss water coverage with your insurance provider and ask for a detailed discussion, so you’ll know exactly if there’s value in adding this to your premium.
Not Protecting Your Valuables
If you have some valuable items in your home, you should specifically ensure those as scheduled items on your policy. Whether they’re laptops and other gadgets, jewelry, family heirloom, or others, unless you’ve insured them for their full value, they may not be covered for full value without an endorsement to your home insurance policy.
Not Getting Tenant Insurance
Condo or homeowners are required by their mortgage company to protect their investment. But what if you’re a renter? The majority of tenants do not have insurance. Most of the time, landlords require renters to sign a lease and ask for proof of tenant insurance with around $1M liability coverage. However, many tenants fail to pay for the policy after a year or never even start with the payments.
Many renters think that their possessions are insured by the landlord – this is not true. Renters need a policy to cover their personal items such as clothing, furniture, and electronics in case of fire or theft. Additionally, renters need liability insurance to protect them from lawsuits should an injury occur in or on their rental space.
Do not make this mistake when there are many benefits to be gained by having tenant insurance.
These are just some of the property insurance mistakes that you should try to avoid. It’s true that insurance is complicated, and you probably don’t understand everything about it, but that’s what advisors are for. Choose a reputable insurance company with knowledgeable employees who can assist you in better understanding what you need to know about home insurance.
Direct Line Insurance is one of the best insurance brokers with offices in Edmonton, Millet, Warburg, Calmar, Sherwood Park and Beaumont that can provide you with the best financial solutions for your needs. Contact us today to find out more!