Do you think the only thing differentiating one Atlanta home insurance policy from another is the price? Many insurance providers would like to make you think that’s the case, so they can win your business with the “lowest cost” home insurance policy. Unfortunately, all they are doing is encouraging you to expose the single largest asset you have…. your home.
The reality is the difference between one home insurance policy and another might be the same as comparing a mobile home to a mansion! Below, we’re sharing the top five pitfalls to be aware of when purchasing home insurance in Atlanta.
- Not Enough Coverage to Rebuild Your Home – This is an area where misinformation reigns supreme as most home buyers have no idea how much money it would take to rebuild their home. Some people believe the home should be insured for its market value while others believe you simply need to cover the loan amount. Both methods are likely to leave you unprotected at the time of loss. This problem is amplified when unscrupulous insurance providers sell you a lower coverage policy to reduce the price. If all policies paid what it takes to rebuild your home, this wouldn’t be a problem. Unfortunately, the fine print limits the amount most insurance companies will pay out. Only a handful of companies still offer true guaranteed replacement cost so be certain your coverage is adequate. Given estimates have shown two out of every three homes are underinsured, it would behoove you to check your policy!
- No Backup of Sewer and Drains Coverage – Do you have a finished basement? If so, your worst nightmare would be a large basement backup causing considerable damage to your living area. When you call your insurance company, you are probably assuming they are going to happily stroke a check for the damage. This is the moment you’ll find most home insurance policies provide limited or no coverage for this loss. How could this be? Due to heavy industry losses over the years, some of the largest insurance companies began capping this coverage and most of the smaller companies followed suit. Bottom line, if you have a finished basement, you better hope your home insurance company isn’t going to have bad news when you call with a sewer backup claim.
- Named Peril Policy – Most home insurance policies provide coverage for your personal property on what is called a named peril HO-3 homeowners policy. This means they’ll only cover losses if they are caused by a specifically listed peril on the policy. An open peril, or HO-5 homeowners policy, is the exact opposite as it covers everything unless the peril is specifically excluded. The examples of losses that may be covered are endless, but which policy would you rather have?
- Not Enough to Pay for Alternative Living Expenses – If you are displaced from your home for a significant period due to a loss, your reasonable expectation would be to live in a comparable home and stay there until your home is ready. However, your home insurance company may not help you accomplish one or either of these goals. Many home insurance policies limit both the amount they will pay AND the length of time they will pay it. If you have a long rebuild ahead of you, this could leave you paying your own bills after the insurance company checkbook runs dry. It is best to find a home insurance company that will keep paying the bills both for the quality you need AND the amount of time you need it.
- No Coverage for Your Jewelry – Like many other areas of an insurance policy, most people just assume everything is covered with no limitations. Theft or mysterious disappearance of jewelry is one of the best examples of a “gotcha” buried within the home insurance policy. If you have a $10,000 engagement ring, most policies will only pay a fraction of that amount if the ring is lost or stolen. Additionally, if you have a collection of many different jewelry pieces the amount an unendorsed home insurance policy pays still stays the same. Often, this cap is as low as $1,000. To make sure you are truly covered, it would be prudent to specifically schedule any high value jewelry or make sure your insurance company provides a higher blanket coverage limit than a standard policy.
Although these pitfalls are certainly not the only issues with a typical home insurance policy, making sure you don’t fall victim to them will go a long way in protecting the asset you worked so hard to attain. Any one of these items could cost you tens of thousands of dollars at the time of loss. By taking a few minutes to discuss these items with a knowledgeable home insurance advisor will be time well spent.