Getting home insurance to meet your needs and expectations can be a smooth process when you have the right guidance and support. That’s why it is always wise to speak with an experienced broker who has the knowledge and resources to find you the ideal coverage for your property and loss exposures.
Here are some misconceptions and pitfalls that can lead to regrets when things go wrong.
1) Believing all home insurance policies are the same
When it comes to wordings and coverage, home insurance is not the same as automobile insurance. Personal property forms and coverage can vary widely by insurance company; auto wordings are standard forms regulated by the provincial government.
Shopping for automobile insurance in Ontario is kind of like shopping for a new car: the specs and available options for the Cruze are the same regardless of the Chevrolet dealership you visit. There is some variation in pricing, depending on dealer inventory and marketing promotions, but just like insurance brokers and the companies they represent, an important difference is found in the product expertise, quality of service, and the ongoing maintenance program provided.
With home insurance, what you end up with can be the difference between buying a Versa or a Tesla. Policy features and coverage options among insurance companies may produce a completely different standard of coverage performance and claims experience.
Solution: A good insurance broker understands the individual needs of customers and how to best meet those needs from a variety of market offerings. Explore all of your options for home insurance with your broker.
2) Not fully understanding coverage for water damage
Water damage—in its various forms—amounts to the highest value of claims dollars paid by insurance companies in the property segment and coverage availability, and pricing has undergone significant change in recent years. Individual insurance companies have unique qualification, underwriting, and pricing initiatives.
Solution: Few events could be more unsettling to a homeowner than a sewer backup or a basement knee-deep in flood water. Your broker is up-to-date in a rapidly changing market and can explain water damage options to guide you toward solutions.
3) Not insuring your home to its proper value
The replacement cost of rebuilding a home is not the same as its market value. The cost of rebuilding your home is constantly changing with inflation and the availability and cost trends for materials. If you haven’t had the replacement cost calculation of your home updated recently, you could be underinsured.
Solution: You can help protect yourself by updating values and purchasing a policy that includes Guaranteed Replacement Cost. Even if the cost to rebuild your home has increased beyond the policy limit, your insurance company will cover the difference. We can review your coverage to ensure you are adequately protected in the event of partial damage or a total loss.
4) Choosing an insurer on price alone
Every insurance company has target customer segments and their own variations of coverage. A home insurance policy with Company A might be cheaper than Company B, but if the policy through Company A doesn’t include coverage for sewer backup or flood, you may be in for a large, out-of-pocket expense.
Solution: It’s important to understand what you are getting for your money and to strike a cost-coverage balance that satisfies your personal needs. Our job, as insurance brokers, is to make you aware of your loss exposures and coverage options and help prevent any unpleasant surprises by arranging the best protection for your money.
5) Not matching your coverage to your risks
Certain activities present more risk to homeowners than others. It is good practice to discuss things you are unsure of with your broker. For example, if you rent all or part of your property to tenants, your insurance company needs to know so proper coverage and pricing can be arranged. Another example is when a small business is being operated from the home. There may be additional risks related to business property or legal obligations to third parties that insurance companies need to evaluate and price as necessary.
Solution: Be sure your broker is aware of activities that are out of the ordinary and may pose extra risk so they can be assessed and priced accordingly. Insurance for a home-based business or renting to a tenant is often available as an endorsement to your existing policy.
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6) Missing or late payments
It is important to ensure your payments are made on time. Missing a payment may cause the insurance company to cancel your policy for non-payment of premiums and the next insurance company approached may require the full year’s premium to be paid in advance.
Solution: Your home insurance policy is usually set for a 12-month term. Clean claims and premium payment records are the best ways to keep your insurance effective and affordable. Many companies offer the option of paying premiums automatically in pre-authorized, monthly installments, which many customers find a convenient option.
7) Choosing the wrong deductible
The deductible is the dollar amount you are required to contribute in the event of a claim. There are different perspectives on whether to take the minimum deductible, at a standard premium, or opt for something larger at a reduced rate.
Some homeowners are primarily concerned with insuring against major losses and prepared to absorb smaller events out-of-pocket to preserve a clean record and benefit from lower rates. It’s also not uncommon for newer homeowners, interested in managing costs, to choose higher deductibles to reduce the monthly premium bill.
With an increase to $1,000 from a standard $500 deductible, you will save incrementally and accumulate savings over time. But home insurance deductibles are charged per event, which means you would pay $1,000 for each claim made.
Note: Most insurance companies will waive the deductible of $1000 (or less) entirely, for major claims exceeding a set minimum dollar value (eg. $25,000, $50,000).
Solution: Assess your own risk tolerance and discuss the pricing strategies and implications for various deductibles with your broker.
8) Not investigating available discounts
Insurance companies compete for business and target market segments by providing a host of discounts for anything from a clean claims record to security systems. Your home insurance broker focuses on making sure you get the coverage you need to protect your property at the best possible price.
Solution: Inquire about available discounts for home insurance and work with your broker to understand specific safeguards (eg. security alarms, sump backflow valves) that can lead to discounted premiums.
9) Failing to update your coverage
Homeowners planning major renovation projects should consult with their home insurance broker before getting started. When you make alterations, like increasing your home’s living space, or adding a swimming pool, you change features that affect the cost of repair or replacement, if something should happen.
A family investing in expensive possessions without notifying their insurance broker could also find their coverage inadequate if those possessions are stolen or damaged.
Solution: Any time you renovate your home or add significantly to the value of your possessions, your broker should be contacted to ensure you are adequately covered. Your broker will ask the right questions to update your policy and make sure you are properly protected.
10) Not exploring options such as identity theft coverage
It is important to look beyond the standard policy model to ensure the right coverage for you and your specific situation. If you are active in the digital environment, identity theft coverage may be an important consideration. The home insurance you buy should offer the right kind of protection to meet your specific needs.
Solution: Ask your broker about specific policy options that may apply to your situation. Your broker can choose from a variety of companies that offer the specialized coverage you need to put together the ideal home insurance policy.
11) Only buying the basic amount of liability insurance
Homeowners sometimes try to save money on their premiums by getting the basic limit of liability insurance. Liability insurance protects homeowners from unexpected lawsuits and other events that can be financially disastrous.
Solution: Your broker can suggest an amount of liability insurance that provides adequate protection and fits your budget. Many insurers also offer personal umbrella policies that broaden the scope of coverage and increase liability limits for personal liability (and automobile) exposures.
12) Neglecting an inventory of your possessions
Your broker needs your assistance to maintain the correct coverage. Compensating home insurance clients for losses is difficult when neither the broker or insurance company knows exactly what has been lost, stolen, or damaged. Your broker can ensure a smooth claims process when equipped with the tools to help you recover your valued possessions.
Solution: An initial inventory of your possessions, with periodic updates, is the best way to help your broker arrange and maintain adequate coverage for your personal property. The inventory will ideally include photographs and detailed descriptions for higher valued or unique items to assist in the filing an accurate claim on your behalf.
13) Losing touch with your broker
A big part of your insurance broker’s job is to be there to discuss your concerns and update your coverage as necessary. Your broker is an important insurance resource who wants to stay in touch with you and make sure you have the coverage you need, initially, and as your circumstances change.
Solution: Never hesitate to pick up the phone and call your Mitch insurance broker with a question or concern. An interactive and dynamic relationship with your broker can save you money and ensure the ideal coverage for your personal circumstances.
Your insurance broker is here to guide you towards the right home insurance policy and coverage for you, while avoiding potential home insurance pitfalls and regrets.