9 homeowner insurance mistakes you can totally avoid

Fri Nov 17 2023

Frustrated young woman in front of a computer with her hands up in exasperation

Homeowners insurance has a reputation for being complex. And historically, it has been. Usually, it's full of legalese that's incredibly hard to parse. It's little wonder so many folks are in the dark about what their insurance actually covers.

In fact, a study from Realtor.com found that only nearly half of all homeowners don’t know what to look for when buying a policy. Ouch.

But that's where we can help. Let's recap the 9 common homeowners insurance mistakes so you can better understand your coverage and avoid confusion when it's time to file a claim.

1. Assuming floods are covered

Home insurance typically covers water damage related to something like a burst pipe, but it seldom pays claims for water coming into your house from an external source. This means storm surge during a hurricane is usually excluded, as is water damage from flash flooding or broken levees. 

Long story short, most people need flood insurance. You can add our flood insurance endorsement to your policy for as little as $175 per year if you live in Florida and Louisiana and have either a homeowners or landlord insurance policy.

2. Failing to compare offers

Homeowners' insurance premiums can fluctuate from company to company. In fact, one insurance company may be too expensive one year, but affordable the next, so you want to compare rates before you renew your policy. 

When you shop around for home insurance, make sure you compare apples to apples. Price is important, but you only know if you’re getting a deal if you also check the coverage amounts and endorsements or add-ons. Otherwise, you may pick the lowest premium only to find out that you’re underinsured

3. Insuring your home for market value - not replacement value

Confusing your home’s fair market value and its replacement cost is one of the most common homeowners insurance mistakes. The limits on your dwelling coverage should be the amount it would take to rebuild your home, not what someone would pay to buy it. A home’s market value can be higher or lower than what it costs to replace or rebuild your home, so it’s not an accurate reflection of what your insurance company needs to make you whole after a loss. 

Your insurance representative can explain how your insurer calculates dwelling value. Most companies use a similar formula that looks at your home’s square footage, building materials, and other features as well as the construction costs based on your location. Understanding this calculation can help insure your home for the proper value. 

4. Choosing too high of a deductible

You can save money on your home insurance if you choose a higher deductible. This increases your responsibility in a claim, and that ultimately saves the insurance company money. However, you want to be cautious if you go this route. Raising your deductible reduces your premium, but you also have to come up with that amount if you have a claim. 

Before committing to a deductible, do the math on how much savings you’re really getting. At some point, the savings may not be worth it if you don’t have an emergency fund to pay for losses. One tip people use is to take the savings from a higher deductible and put that into an emergency fund to build that nest egg. But you have to be disciplined to do this. 

5. Not getting sewer backup coverage

Most homeowners insurance policies automatically exclude losses resulting from a sewer backup. That’s right! Damage to your newly renovated bathroom may not be covered if sewer water backs up into your home. Luckily, most insurance companies offer a water backup endorsement that covers this event for as little as $40 per year. 

6. Underestimating the value of personal belongings

People often grossly underestimate the value of the contents of their homes; some even do it on purpose in hopes of saving on their insurance. But think about what that might cost you in a total loss. When you add up the value of everything inside your home, from electronics to appliances, clothing, and home goods, you could be looking at more than $100,000 in stuff. 

One way to get a better handle on what your personal belongings are worth is to conduct a home inventory. Use a checklist to properly record and categorize your stuff, and then store a copy away from your home so you can access it if there’s a catastrophe. You’ll be glad you have a complete list of lost items that includes serial numbers and receipts. 

7. Keeping the minimum liability coverage

The default limit for liability coverage in a homeowners insurance policy is usually $100,000, and that may be enough for some people. But others, like homeowners with an attractive nuisance or who host large parties, may have a greater risk of being sued and might want to consider increasing their liability coverage. 

In many states, there aren’t requirements or laws dictating how much coverage you need, so you may find it’s up to you to determine what’s the appropriate amount. But in other places, like Virginia, there are mandatory coverage minimums. The key is weighing how much risk you face against how much liability coverage you can afford.

Important to note: increasing your liability coverage won’t dramatically increase your premium.

Unsure about what’s right for you? Talk to your agent.

8. Forgetting to notify your insurer of major changes

Certain changes in your home life merit a call to your insurance representative because they impact your coverage. For example, let your insurer know if you:

Changes like these can mean you need additional coverage, and if you don’t notify your insurance carrier you risk having a claim denied because the new detail wasn’t part of the original coverage. Don’t feel like you’re burdening your insurance agent with phone calls. They need to know and appreciate the heads-up. 

9. Thinking home insurance covers maintenance issues

As a homeowner, you’re responsible for maintaining your home – normal wear and tear isn’t covered by most policies. This includes issues that might cause damage if you ignore them, like getting a new roof when necessary or dealing with pests. If you don’t take care of these kinds of problems, your insurance may deny a claim for any resulting damages.

For example, let’s say the railing on your staircase has rotted and gives away when your neighbor grabs it. While your homeowner's insurance usually covers a visitor’s injuries, it would most likely deny this claim because you failed to take care of the railing.

Once you know the basics, getting homeowners insurance is pretty easy. All you have to do is answer a few simple questions and you can have your policy in just minutes. But if you still have questions, our representatives are also ready to help.


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