Common Mistakes in Purchasing Homeowner's Insurance

Not Insuring the Structure to Its Full Replacement Cost

This is far and above the most common mistake. From the consumers perspective the root of the problem lies in not understanding the difference between Market Value and Replacement Cost.  They are not necessarily related.  To complicate matters, there is also a common misunderstanding between new construction cost and replacement cost.
The latter always has to do with rebuilding an existing structure, which if you ask any general contractor, always costs much more per square foot than new construction.

I’ve just received two quotes from the same insurance company, from two different agents, and their prices were different!!  Why’s that?

Assuming you provided the same information to both agents, one or even both of the agents may have made a mistake, either intentionally or unintentionally.  Let me explain.

 If the quotes were run the same, i.e. the same coverage amounts and endorsements, the quotes would match exactly.  Contrary to popular belief, agents can’t offer different prices to different customers for the same product.  Insurance does not work like retail.

The only exception is if an agency has received approval from the Florida Dept of Financial Services to utilize a rebate program.  This type of program is almost exclusively utilized in the commercial markets, not with home insurance, and requires up front disclosure.

The most likely scenario is that a mistake has been made in the amounts and types of coverage quoted.  Having been said, you need to take the time to discuss the coverage amounts and endorsements offered by each agency.  A classic mistake is the amount quoted on the dwelling itself.  One agent may simply quote the dollar amount you gave him, while another may have taken the time to calculate the actual replacement cost, and then provide a quote based upon that number.  Other common prices cutters are, quoting a high hurricane deductible, excluding replacement cost on the dwelling and or contents, not adding ordinance of law or going with the minimum family liability limits available.  All these are fine, if you agree to them, but potentially devastating at the time of loss if you’re not aware or prepared to deal with the added exposure they bring.

Which agent do you want to look after your insurance needs? Is it the one that is careful to confirm what is actually needed and provides a tailored quote that fits, or one that sees you as just another sale to be made?

Not Scheduling Fine Arts and Jewelry

Almost every homeowner policy restricts both the coverage amounts and the covered perils to this classification of property.

Not Extending Liability to Rental Properties, Vacant Land you own, and Secondary Residences

You need to disclose other properties to your agent so he/she can confirm and or provide the proper coverage.

Insuring Tenant Occupied homes under a homeowner’s policy.

Essentially, you are not properly insured for nature of the claims you are exposed to.

Insuring Vacant for sale homes under either a dwelling fire or homeowners policy

This too, would result in uncovered claims due to the nature of the risk.  This type of exposure requires a vacant dwelling policy in order to provide coverage.
As a closing note, in the world of property and casualty insurance, insurability is determined at the time of the loss, not at the time of policy purchase.  That is why it is always important to work closely with your insurance agent when you first purchase your policies and then later as things change.   Take the time to get to know your agent and for them to know you.  Meet with them regularly, that way they can make sure your coverage’s change as your needs change.