At Homestead Roofing we work with a lot of homeowners, and most of the time the projects that we do for those homeowners involve insurance claims, so we actually get to see a lot of the mistakes that new homeowners make with their insurance coverage and their policies.
If you're a new homeowner, in this post you're going to learn what those mistakes are and how to avoid them.
Mistake #1: New homeowners don't do their research on which insurance companies are good or bad.
Instead, they choose an insurance company based on that company's TV ads, or which company their insurance broker recommends, or which company their mom and dad have used for the past several decades.
But what makes an insurance company good or bad?
Here are some criteria for you to use to evaluate insurance companies.
Use Google to find out if the insurance company that you are considering is regularly named in lawsuits for bad faith against their clients or, are there currently any class action lawsuits against that insurance company.
Or do a Google search for “worst property and casualty insurance companies.” When I did that, I found a PDF called “The 10 Worst Insurance Companies in America.” This is a document published by the American Association for Justice (formerly known as The Association of Trial Lawyers of America). This is an organization that has experience working with insurance companies and they're giving their opinion about which ones are the worst ones.
There are also a couple of books that you can read. You may or may not be able to get the Kindle versions, however I do know that you can get the paperback versions from Amazon.
The first book is called, “Dely, Deny, And Defend,” and it's all about the tactics that insurance company use to get out of having to pay claims. The other book is called, “From Good Hands To Boxing Gloves,” and while this book is primarily about one company in particular the principles apply through all the insurance companies.
You can also look on Reddit and find subgroups of restoration contractors that have to deal with insurance companies. The comments in those groups will give you a lot of information about the different companies.
Mistake #2: New homeowners only look at what their monthly payment will be and not the coverage they will get.
Most new homeowners have pretty tight budgets so they end up trying to find the cheapest insurance they can. If they're shopping for insurance on their own they'll usually collect a few quotes and select the cheapest one.
If they're using an insurance broker and the broker knows a homeowner is on a tight budget he may recommend a really cheap policy just to get a sale.
But the cheapest policy is rarely ever the best policy for you. Watch the video below for a full explanation of why you don't want the cheapest insurance policy.
Mistake #3: New homeowners don't read their policy renewal documents every year
You might start off with a good insurance policy but then when that comes up for renewal the next year your insurance company might make changes to your deductible or to your coverage. When they do that, the way they inform you of it is in the document they send to you at your renewal period.
If you don't read that document then you're not going to know what changes are being made, so if your insurance company changes your deductible or your coverage type you won't know about it unless you read that document. If you then renew your coverage with that company you've just agreed to the new terms of your policy.
Watch the video below for a full explanation of why it's important that you read your policy renewal documents.
Mistake #4: New homeowners are promiscuous about filing claims
A new homeowner tends to think that his insurance coverage is there to bail him out so he doesn't have to pay for things that would be normal wear and tear or maintenance expenses
So they end up filing a claim for anything because that's what they think their insurance is for.
New homeowners might end up calling their insurance companies for minor things like holes in the drywall, or a leaky sink, but more commonly they call their insurance companies if a hailstorm hits their neighborhood. Especially if all their neighbors are calling their insurance companies.
Remember, every time you call your insurance company about something like that, a claim goes on your record and every claim you make counts against you.
So what should you do?
Treat your insurance claim record with as much care and protection as you do your credit score. A good rule of thumb is that if you can pay for the repairs out of pocket then don't file a claim. So begin setting money aside for your home maintenance or emergency fund.
Watch this video for a full explanation of each of the points in this post.