Episode•May 23, 2023•10 min

Shopping for Home Insurance: What You Need to Know Before You Buy | Ep. 231

Are you shopping for home insurance? It's important to make sure your coverage will last. In this episode, we share the story of a client whose insurance did not cover the full cost of rebuilding their house due to inflation and increasing home-building costs. We'll also give you valuable tips for finding the right balance between coverage and affordability when shopping for home insurance. Check it out now and protect your family and belongings with the right coverage! Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Home insurance policies can become outdated due to inflation and rising rebuilding costs, leaving homeowners underinsured.
Tiffany and a client both discovered their policies wouldn't cover full rebuilding costs after a loss
Regular policy renewals don't automatically adjust for increased home values or construction expenses
It's essential to periodically reassess coverage amounts rather than letting policies auto-renew indefinitely
2
Geographic location and home type significantly impact insurance needs and costs.
Areas prone to earthquakes or floods require additional riders since standard policies exclude these
Coverage requirements differ between single-family homes, townhouses, and condos
Moving between home types means insurance costs will change and should be factored into decisions
3
Choosing the right deductible requires balancing affordability with the ability to pay out-of-pocket when needed.
Lower deductibles mean higher premiums; higher deductibles mean lower premiums
Tiffany recommends a $1,000 deductible because she can comfortably cover that amount
If the deductible is too high, you may not have funds available when insurance is needed most
4
Shopping multiple independent insurance agents provides broader coverage comparisons.
Independent agents already shop multiple carriers they have relationships with
Going to multiple independent agents expands options beyond a single agent's network
Tiffany shops auto insurance every 6 months and home insurance annually to avoid overpaying
5
Adequate liability and personal property coverage protects against lawsuits and theft/damage.
Liability coverage protects against legal claims if someone is injured on your property
Personal property coverage requires estimating the value of belongings to set appropriate limits
Both are often overlooked but critical for comprehensive protection

Intro

Tiffany shares a cautionary tale about underinsured home policies and provides practical guidance for shopping for adequate home insurance coverage.
Tiffany is a financial coach and host of the Money Talk with Tiff podcast, where she answers listener-submitted money questions every Tuesday.

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– The Wake-Up Call: Underinsured After a Loss

Tiffany recounts a client meeting where they discovered the client's home insurance wouldn't cover the full cost of rebuilding after a loss. This prompted Tiffany to check her own policy, only to find she was also underinsured.

I went and I called my insurance company and I did not have enough to rebuild my home either. And so I had to get new insurance.
– Tiffany

– Tip 1: Consider Your Geographical Location

Location determines what additional coverage may be needed. Standard policies typically exclude earthquakes and floods, requiring separate riders or policies for those risks.

– Tip 2: Factor in Your Home Type

Insurance costs vary significantly between single-family homes, townhouses, and condos. When moving, homeowners should anticipate these differences and adjust coverage accordingly.

– Tip 3: Know Your Coverage Amount

Determine coverage needs before shopping. Consider inflation, new high-value purchases, and rising construction costs rather than accepting standard policy limits without review.

Don't settle for a standard policy without understanding the limits and exclusions.
– Tiffany

– Tip 4: Choose Your Deductible Wisely

The deductible is what you pay out-of-pocket before insurance kicks in. Tiffany recommends selecting an amount you can comfortably afford, using her own $1,000 deductible as an example.

– Tip 5: Research the Insurance Company's Reputation

Review customer service ratings, claims handling history, and complaints online. Ask family and friends about their experiences with claims processes before committing to a provider.

– Tip 6: Ensure Adequate Liability Coverage

Liability coverage protects against legal claims if someone is injured on your property. Tiffany emphasizes having enough coverage to avoid paying hospital bills or legal costs out of pocket.

– Tip 7: Cover Your Personal Property

Estimate the value of belongings to set appropriate personal property coverage limits. This protects against theft, damage, or loss—coverage that applies to both homeowners and renters.

– Tip 8: Compare Policies and Rates Regularly

Use multiple independent agents to shop across more carriers. Tiffany shops auto insurance every six months and home insurance annually to ensure she's not overpaying while maintaining adequate coverage.

It's a balancing act. You don't want to overpay, have too much insurance, but you also don't want to have enough and then be stuck if something was to truly happen.
– Tiffany

Resources

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Topics

home insuranceinsurance shoppingunderinsured homesdeductiblesliability coveragepersonal property coverageinsurance agentsfinancial planningrisk managementinflation and costs