1. Underestimating Your Insurance Needs

When you have a covered loss, homeowners insurance generally covers the following:

• Your dwelling: The cost of repairing or rebuilding your home’s structure.
• Personal property: The cost of repairing or replacing damaged or stolen possessions.
• Additional living expenses: The cost of living elsewhere during home repairs.
• Liability: Legal and medical expenses if a visitor is injured on your property.

Standard coverage amounts may not offer the protection you need, but you can purchase more of each type of coverage. Your dwelling coverage should equal your home’s replacement cost value, not its market value or mortgage balance. To protect yourself from rising construction costs, consider additional coverage.

2. Not Understanding Exclusions

Home insurance generally doesn’t cover damage caused by earthquakes, floods, sinkholes, landslides, or water backup due to a failed sewer, sump pump, septic tank, or drain. You can buy standalone insurance policies for these events. Always read your policy carefully and ask for explanations of anything you don’t understand.

3. Setting Your Deductible Too High or Too Low

Homeowners insurance deductibles may be a set dollar amount or a percentage of your dwelling’s insured value. A lower deductible means higher premiums, while a higher deductible can reduce your premiums but increase out-of-pocket costs during a claim. Evaluate your budget and savings to strike a balance.

4. Not Shopping Around

If you haven’t switched your homeowners insurance in years, you could be missing out on savings. Shopping around for a more affordable policy every year or two, or whenever your insurer increases your premiums, could pay off. Use online marketplaces to compare quotes from multiple providers.

5. Not Checking for Discounts

Regularly checking with insurers for discounts can uncover new ways to save. Discounts may be available for loyalty, being retired, going claim-free, adding a security system, replacing an old roof, or installing storm shutters. Bundling multiple policies with the same carrier can also save you money.

6. Buying Home Insurance Based Solely on Price

Low-priced home insurance won’t seem like a good deal if you can’t get assistance for a claim. Before buying, read customer service ratings and reviews, and check the National Association of Insurance Commissioners for customer complaints. Evaluate the company’s financial stability through ratings from A.M. Best, Moody’s, and S&P.

7. Not Informing Your Insurer of Major Renovations

Remodeling your home can affect the cost of rebuilding or pose new risks, requiring more coverage. Inform your insurance company about major updates to avoid being underinsured. Changes like adding square footage, installing a pool, or upgrading materials typically raise rates, while upgrades like a fire-resistant roof could lower premiums.

8. Filing Too Many Insurance Claims

Filing an insurance claim can boost your premiums. Insurers review the Comprehensive Loss Underwriting Exchange (CLUE) database when setting rates. Claims filed within the past seven years can mean higher premiums. Only file a claim after a major loss to avoid higher rates and losing claim-free discounts.

9. Dropping Coverage Once Your Home Is Paid Off

Mortgage lenders require homeowners insurance to protect their investment. Once your mortgage is paid off, you could drop your insurance, but it’s risky. Unless you can afford to rebuild your home after a disaster, going without insurance could cost you much more than it saves.