Consumer Reports: 3 big property insurance mistakes
Consumer Reports: What you don’t know about home insurance could cost you.
We buy homeowners insurance to protect against the high drama of our greatest fears: tornadoes ripping off the roof, fire racing up the stairs or floodwaters lapping at the front porch.
But in reality, the worst rarely happens.
As a result, most of us don’t spend a lot of time thinking about homeowners insurance. We get the coverage when we buy our house and then – unless and until something happens – pretty much put it out of our heads.
Here are three insurance surprises from Consumer Reports:
You may be paying too much: Many of the respondents to a recent survey Consumer Reports conducted of more than 85,000 subscribers stick with the same company for 15, 20, 30 or more years and seldom shop around for new policies.
About 9 percent switched insurers in the previous three years, and more than half reported finding a better price. Homeowners insurance isn’t as price-competitive as auto insurance, but you can still save hundreds to more than $1,000 per year in premiums by shopping around.
Homeowners insurance requires a careful assessment of your risks and coverage needs.
Consumer Reports recommends working with an independent agent who can compare premiums and isn’t beholden to one company. Direct-to-consumer sellers, such as Geico, Farmers and USAA and captive-agent companies, such as Allstate and State Farm, only offer their own brand.
You can find an independent agent at TrustedChoice.com, a website run by the Independent Insurance Agents and Brokers of America, a trade association.
You may not be covered enough: Some homeowners also don’t realize that a standard policy doesn’t cover everything. For example, 56 percent incorrectly think that flood insurance is covered by a standard policy, according to Princeton Survey Research Associates International.
Consumer Reports suggests working with your agent to buy separate flood and earthquake protection. You also may need a separate hurricane policy if you live in a high-risk zone.
Add-on policies are a must to cover sewer backups or the extra cost of rebuilding, according to the latest codes and ordinances.
A typical policy covers the structure and outbuildings; the contents of the house; personal liability if you, your family or pet cause damages to others; and additional living expenses if your house is so badly damaged you need a temporary place to live.
Don’t worry too much about filing a small claim: Some people don’t make claims when they have a small loss for fear it will jack up their premiums and cost them more over time. About 22 percent of the survey respondents said they chose not to file a claim for this reason.
But the survey also found that 57 percent who filed claims of less than $5,000 saw no premium increase.
Home insurers might raise rates by tacking on a surcharge if the loss is above a certain amount, but the thresholds and surcharges vary by company, type of loss and number of claims filed in a given period.
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