Costly Insurance Mistakes to Avoid

Avoiding these common insurance mistakes will help ensure you have solid protection.

Underinsuring your home. Failing to insure your home at its replacement value is the biggest mistake a homeowner can make. The cost to rebuild a home is typically more than its market value and can fluctuate over time due to labor and building supply costs. If your home is significantly underinsured, you may need more funds to rebuild.

Not having extended replacement cost coverage. This optional coverage can pay to rebuild your home exactly as it was, even if the cost exceeds the estimated replacement cost of the house. The primary purpose is to protect you against sudden increases in materials or construction costs that can occur after a hurricane or other disaster. Depending on your policy, extended replacement costs can pay up to an additional 100% of your policy’s Dwelling Coverage limit.

Not considering building code change additional costs. Building codes change periodically. If your home is badly damaged, you may be required to rebuild to meet new building codes. A basic homeowner policy typically excludes these extra expenses. However, you can purchase an “ordinance or law endorsement” that pays a specified amount toward these costs.

Ignoring flood and earthquake coverage. Just because you don’t live along a river or in California doesn’t mean that you don’t need to seriously consider these coverages, which are excluded under a standard home policy.

Not buying renters insurance. If you rent (or cohabitate and don’t own the home you live in), a renters policy not only covers your possessions but also provides liability protection. It also covers additional living expenses if a fire or other covered situation requires that you move out temporarily.

Failing to have replacement cost on contents. Whether you rent or own, make sure your possessions are insured at the cost of replacing them with new comparable items. Otherwise, you’d only receive the depreciated value of your possessions, which is probably only a fraction of what it would cost you to replace them. Imagine having to replace everything, and you’ll quickly see why this is essential.

Purchasing only the most essential coverage. When unexpected accidents in life become a reality, having only basic coverage can still leave a significant financial burden on you. Paying for insurance coverage that doesn’t cover your needs isn’t helpful. Talk to your agent at Murphy Insurance about ways to manage your costs while having higher limits in the areas where the most significant risk exists, such as:

• bodily injury to others
• damage to others’ property
• medical coverage
• personal liability
• underinsured/uninsured motorist coverage