When you buy your dream apartment, you would certainly want to protect it from both natural and man-made disasters. You decide to purchase property insurance, and in your excitement, you overlook a few terms and conditions and sign the papers. A few months later, a pipe bursts in the kitchen and it floods the entire living room. You filed a claim, but your claim request was rejected. Why? You had dropped water damage from internal leaks. Well, misunderstood terms and overlooked clauses can prove to be costly mistakes.
So, what are the common pitfalls to watch out for? Let’s find out.
Mistakes to avoid when purchasing property insurance
- Underestimating your coverage needs
We all know that limited coverage would translate to smaller premiums. But when you look at the cost of repairing the building, you will regret having inadequate coverage. So, always take a closer look at the cost of replacing or repairing damaged or stolen items before deciding the coverage. Opt for a comprehensive plan, as basic coverage may not offer the protection you need amid rising construction costs.
- Taking exclusions lightly
Now, imagine your coverage says that any damage done due to floods will not be covered and you also accept it as there is no large water body in your neighbourhood. However, during monsoon, incessant rains flooded your home. At that point, you would wish that exclusion wasn’t there, or you had taken a separate standalone plan for flood damage. So, read the exclusions carefully and ask for explanations if there’s anything you don't understand.
- Not comparing plans
Today, the insurance market has no dearth of companies offering good plans. When you shop around, you will have a better chance of finding a better deal. The comparisons should be done not only on the basis of premiums and benefits offered but also on keeping in mind the claim settlement ratio and the market reputation of the insurer.
- High deductible
A deductible is the amount the policyholder must pay before the insurer pays the claim amount. It’s a win-win situation both for the policyholder and the insurer because it gives discounts on the premium to the policyholder and reduces the risk factor for the insurer. However, a high deductible would mean you are paying a massive chunk of the repair cost despite having an insurance policy. So, be careful of the deductible you are choosing.
- Not checking for discounts
You already have car insurance and health insurance from a company, and you now wish to buy property insurance from them. It is well within your rights to ask for discounts for being a loyal customer. Similarly, there are other things you do to get discounts like installing a security system to storm shutters. It will reduce the risk for the insurer and you will get discounts.
- Not keeping your insurer informed
When you buy a policy, the agreement is made based on the present structure of the building. So, when you do any renovation work, you need to inform the insurer so that the changes can be made to the agreement. At times, the renovation may increase or decrease the risk factor which the insurer must assess. On the basis of their assessment, they may revise the premium. If they find out about the changes during the claim settlement process, your request will be rejected for not disclosing information.
- Too many claims
Have you heard the adage ‘too many cooks spoil the broth’? Well, that is exactly what will happen to your policy if you continue to file claim requests. Filing a claim not only eliminates any discounts for being claim-free that year, it also reflects on your profile. Once your profile is labelled as risky, any insurer will ask for a bigger premium. So, if there are small repairs that you can do by spending a little on your own, do it. It will help you in the long run.
Conclusion
Many people believe that property insurance is unnecessary until they have to pay for the replacement or repair of their property or valuable contents. Some policyholders who buy insurance make certain mistakes, which prevent them from getting the most out of their coverage. By avoiding common home insurance mistakes, you can get a good deal at a lower price while financially safeguarding your home.