5 Homeowners Insurance Mistakes to Watch Out for in Michigan
Insurance is something that most of us don’t think about until we need to file a claim, and we rely on the insurance company to pay up.
Unfortunately, making a mistake when you purchase a homeowners insurance policy can result in receiving less money than you need to be made whole. In some situations, your claim could be rejected altogether.
This article will share the 5 most common mistakes we see Michigan homeowners make with their homeowner’s insurance policies and how you can avoid doing the same.
1. Purchasing Insurance for Market Value Instead of Replacement Value
If your home undergoes extensive damage and needs to be rebuilt, you’ll wish that you had purchased replacement value insurance, not market value.
Despite the current “hot” real estate market, it is still possible that it could cost more to rebuild your home than what it would fetch on the open market (the market value). This is especially true if you live in a rural area, there are new zoning ordinances, or your home was damaged by a natural disaster. In the latter situation, this results in several homes at once needing to be rebuilt, which drives up the cost of labor and building materials.
Because the real estate market fluctuates, purchasing insurance that covers the replacement value is a safer bet.
2. Trying to Save Money with a High Deductible
It’s not uncommon for homeowners to attempt to save money on their premiums by having a higher deductible. Unfortunately, when the unthinkable happens, a high deductible could mean you have to shell out $2,000 or more before your insurance kicks in.
If you don’t have substantial savings, you could be better off paying a few extra dollars on your monthly premium in exchange for a more reasonable deductible. If you do the calculations, you’ll probably find that you’ll save money by having a lower deductible and a slightly higher premium.
3. Not Purchasing Flood Insurance
Many homeowners mistakenly believe that their standard insurance policy covers flooding. However, water damage is only covered by water that comes from inside the home, like a burst pipe or overflowing bathtub. Floods from storms or water surges require a separate flood insurance policy to be covered.
Even if you don’t live on a flood plain, it’s still a good idea to get flood insurance. Homes in low and moderate-risk flood zones account for 20% of flood insurance claims.
4. Purchasing the Minimum in Liability Coverage
Homeowner’s insurance policies include a category of coverage referred to as “liability coverage.” If someone is injured on your property, your insurance company will foot the bill. Liability insurance covers their medical bills, lost wages, and other damages that the person could claim in settlement negotiations or a lawsuit.
Even if you rarely entertain guests or think your friends or family won’t come after you for money if they trip on your stairs (for example), it’s better to be safe than sorry here. Even a delivery driver could have a legitimate claim against you if they’re injured on your land.
If a claim exceeds your liability coverage, you could be personally on the hook for the balance, and that number could exceed five or six figures.
5. Failing to Notify Your Insurer of Significant Life Changes
You might think that your insurance agent has better things to do than hear about your new dog or your bathroom remodel project, but that would be a mistake. Whenever a life change comes about that could affect your insurance coverage, you must report it, or a future claim could be rejected.
The changes that you should report include:
– Someone new moving in (whether through marriage, a relationship, a family member who needs a place to stay, a roommate situation, etc.)
– Getting a dog that belongs to a “restricted” breed
– Remodeling projects or room additions
Avoid Costly Mistakes and Get the Right Homeowners Insurance Policy
The price of coverage between various homeowners’ insurance companies varies widely, even when the policies offer nearly identical types of coverage. The price differences are often due to the different ways that insurance companies calculate risk and evaluate properties and policyholders.
To ensure you get the best coverage at the most reasonable rate, contact Encore Insurance at 248-466-0200 to request your free quote. Our team will walk you through your various options and help you avoid making mistakes that we see so many other Michigan homeowners make.