Homeowners Insurance: 3 Mistakes To Avoid When Buying A Policy

Purchasing homeowner's insurance is an important part of being a homeowner. If you have a mortgage on your home, your mortgage company will likely require you to carry a policy, but even if you own your home free and clear, it is still essential to hold the right insurance policy. Whether you're a first-time home buyer making your first homeowner's insurance policy purchase, or you're planning on shopping for a new policy to replace your current one, you need to go about the process the right way. When purchasing a new homeowner's insurance policy, avoid these common mistakes:

Failing to Shop Around

There are no set fees when it comes to homeowner's insurance policies, so premiums charged can vary greatly from one company to another. Thus, when you're shopping for a homeowner's insurance policy, it is never a good idea to buy from the first company that you get a quote from. The internet makes it easy to get price quotes for insurance online, so it is well worth your time to get several quotes before making your buying decision. Just make sure that each policy is for the same amount and offers the same coverage to ensure it is easier to compare your options.

Not Opting for a Policy that Offers Replacement Cost for Your Belongings

Many people confuse the terms replacement cost and actual cash value when buying a homeowner's insurance policy. In most cases, it is best to avoid a policy that offers actual cash value for your belongings, since the actual cash value is often a lot less than what it costs to replace something with a new product. When you choose a homeowner's insurance policy that offers replacement cost for your belongings, the insurance company will pay to replace any items that are stolen or damaged beyond repair with a similar product, regardless of the actual cash value at the time of the claim.

Buying a Policy That is Too Big

Homeowner's insurance provides an extremely important safety net, but there is no reason to pay more for a policy that is larger than you need. Always take into account how much it would cost to rebuild your home in the event of a total loss. The cost to rebuild a house is typically a lot less than the market value, since you will still own your lot. If you buy a homeowner's insurance policy based of the market value of your home, you will end up spending more on premiums than is necessary.