Avoid these 5 common homeowners insurance mistakes

Key takeaways:

• While saving money matters, having reliable homeowners insurance is just as important.
• Don't assume that everything is covered under your home insurance policy.
• Natural disasters, like earthquakes and floods, usually aren't covered in standard homeowners insurance policies.

Here are 5 common pitfalls you should avoid to save time, money and headaches when it comes to homeowners insurance.

1. Shopping for the cheapest policy you can find

Like most things in life, you get what you pay for. When it comes to homeowners insurance, choosing a cheap or low-cost policy might seem like a good way to save money, but it can come with serious risks like

• Insufficient coverage: Less expensive insurance options could leave you with gaps in coverage, meaning you might have to cover damages out of pocket.
• Exclusions for common risks: Some budget options might skip coverage for things like wind damage, meaning repairs are more likely to be your responsibility.
• Risk of a policy cancellation: Insurers offering cheap policies might not be financially stable. If they shut down, your coverage could disappear leaving you uninsured.
• Slow or denied claims: Cutting costs could lead to less claim payouts, leaving you hanging when you need help.

2. Forgetting to include "other structures" in your policy

This is an important one. Your policy can, and should, cover more than just your house if you have other structures on your property.

Think about things like patios, pergolas, sheds, barns, playhouses, or greenhouses. If you don't add these types of structures to your policy, you'll likely be out of luck if you need to file a claim.

Plus, a lot of homeowners don't realize how pricey it can be to fix or replace these structures. If your barn or shed gets destroyed in a fire and you don't have them stated in your policy, you likely wouldn't get any insurance money to replace them.

3. Neglecting inflation protection

When getting quotes, check to see if coverage includes inflation protection, or has the option to add it. This is valuable coverage to have when selecting your policy, especially when costs always seem to be increasing. Inflation protection will help your policy keep up with the current cost to rebuild your home in the event of a covered loss.

For example, if your home is insured for $500,000 and construction costs jump by 3% over the year, your coverage automatically adjusts to $515,000 so you would have enough coverage to rebuild at the current costs.

4. Failing to research homeowner insurance cost when buying a home

Homeowners insurance rates can vary widely depending on where you live. When house hunting, you need to research how much insurance for your new home will cost. Additionally, getting good, affordable coverage is becoming more difficult in areas more susceptible to natural disasters like floods, hurricanes, earthquakes, and wildfires.

Many of these risks aren't covered under a basic home insurance policy, so if you're in a high-risk area, it's absolutely crucial to research these additional coverages and how much they cost.

5. Assuming everything is covered

It's a common misconception that a standard home insurance policy covers all your personal belongings against all risks. Sadly, that's not true. Homeowner policies have exclusions for things like

• Floods
• Earthquakes
• Pest infestations
• Personal property of high value (you'll want separate coverage for expensive jewelry, and art, for example)
• Normal wear and tear due to aging, neglect, or maintenance (roof replacements, for example, are not covered due to aging)
• Damage caused by normal wear and tear due to aging, neglect, or maintenance (mold, for example, from lack of home maintenance would not generally be covered)

Your policy will also have limits. In fact, every part of your policy—dwelling, personal property, and liability—will have its own limit. The limit is the dollar amount that your insurance will pay for a covered loss.

If repair or replacement costs exceed these limits, you'll be responsible for the difference out of pocket. When getting quotes, you can adjust these limits to see how it impacts the price of your policy.

If you still need coverage beyond the limits offered, have a lot of assets, or are just worried about liability risks, you may want to look into a standalone personal umbrella policy. An umbrella policy will generally give you extra coverage beyond the limits of your auto and home policies to give you more financial protection and give you peace of mind.

Get a homeowners insurance quote and see how much you could save when you only pay for what you need.