Are You Leaving Yourself Exposed To Risk With Your Home Insurance?

Insuring one's home isn't just something a person should do because it is required. In the event of a disaster that causes you to lose property of significant value, this insurance is the only thing that can help you to get back on your feet.

However, getting home insurance isn't as easy as going to any insurance agent and taking out a policy. There are other factors you have to take into account first. Many people have taken out insurance policies only to find out they're either inadequate or of no use when they needed them.

Insuring a House Based on Current Market Value

Taking out a policy for your home based on its value when the market is in decline seems like a simple way to pay lower premiums. However, insurers actually base their policies on the amount it would cost to rebuild the home. Usually, a house must be insured for at least 80% of what it would cost to rebuild it. Failure to do so can actually result in penalties that can reduce your claim.

Assuming Every Type of Disaster is Covered

As many Americans know by now, insurance companies can get very flexible in their definition of disasters and the causes of damage. Just because a policy is called an 'all-risk insurance' doesn't mean that every possible cause of damage is covered. Floods, wildfires, sewer backups, earthquakes and many other issues are normally not covered under such policies. Be sure to read the fine print.

Not Know Risks Facing Homeowners in a Given Area

Before you take out an insurance policy, it's important to figure out what you're insuring your home against. Although flooding might be an absolute rarity where you previously live, it might be an annual risk faced by homeowners in your new neighborhood. Take the time to find out what risks homes in a given area face.

Choosing Insurers Primarily Due to Price

No insurance company is in business to offer free money. If an insurance policy is priced lower than others, it probably means the quality isn't as good as the others. In such instances, the first thing you should do is look over the terms and conditions keenly. There might be a number of surprises added in the fine print. Alternatively, it may be what's not on the policy that you should be most worried about. Pricing shouldn't be the determinant factor when choosing policies.