12 Common Property Insurance Mistakes to Avoid You Could Lose Everything

Property Insurance Mistakes - Insurance laws may vary widely from state to state, different kinds of property require specialized coverage, and collections of art, antique cars, and other unique items may be difficult to protect fully.

12 Common Property Insurance Mistakes to Avoid You Could Lose Everything

Getting the right property and casualty insurance coverage may not rank high on your list of financial priorities. Compared with investment decisions and estate planning issues, questions about the language in your homeowners policy, say, may seem hardly worth considering. 

Yet the more successful you become, the more complicated your asset-protection needs are likely to be—and the more you have to lose. Suppose, for example, that in addition to your primary residence—a historic home—you also own a house at the beach and a condo in the city. The properties are in three different states. The value of your collection of Abstract Expressionist paintings has grown rapidly. And you just volunteered to serve on the board of directors of a charitable organization.

Almost every aspect of this situation could cost you dearly. Insurance laws may vary widely from state to state, different kinds of property require specialized coverage, and collections of art, antique cars, and other unique items may be difficult to protect fully. Meanwhile, serving on a nonprofit's board could subject you to additional personal liability.

Safeguarding yourself and your family may mean buying additional coverage, but more insurance isn’t necessarily the solution. Rather, it’s important to review all of your needs, consider specialized policies or policy options, and coordinate your coverage with other aspects of your financial situation. Here are 12 Common Property Insurance Mistakes to Avoid You Could Lose Everything.

1. Leaving gaps in homeowners coverage

Any homeowner needs to review coverage regularly to keep up with rising replacement costs. But insuring different kinds of homes in different locales poses extra challenges. If you buy insurance from more than one carrier, you may face contrasting rules, limitations, and policy renewal dates. For example, the liability limit on the policy for a second home might fall below the minimum on an excess liability policy designed to complement the insurance on your primary home. You could wind up responsible for the difference.

2. Ignoring properties unique characteristics

One perk of affluence is the means to own exceptional homes; one drawback is that they may be difficult to insure adequately. Standard homeowners coverage won’t pay for the materials and craftsmanship needed to rebuild that 19th century showplace you’ve painstakingly restored. Coastal homes may face hurricane damage, while a place in the California mountains could be subject to earthquakes or wildfires. Meanwhile, city co-ops or condos may need policies tailored to their buildings or associations coverage.

3. Under insuring art and collectibles

Standard homeowners policies limit coverage for the losses of antiques, furs, and other valuables. And while you could schedule additional coverage, insuring the real value of a collection of contemporary art or vintage muscle cars likely will require a specialized policy addressing several critical issues. How is the value of the collection determined? (You’ll need a professional appraisal when the policy is designed, with frequent updates as items appreciate.) Will a damaged or destroyed item be paid for with cash, or will you be required to have it replaced or restored? Will additions to your collection automatically be covered?

4. Forgetting to insure household employees 

When someone works for you or your family, as a nanny, landscaper, personal assistant, or in another role, you could be liable for medical expenses and lost wages if the worker is hurt on the job. Several states require household employers to pay into a workers compensation fund, while in other states it’s optional, but providing such insurance may be mandatory for ensuring your financial well being. If an employee drives your car, also make sure he or she is included on your policy.

5. Neglecting your liability as a board member

Excess liability coverage could help protect you if you’re sued as a director of a nonprofit's board. Or for more comprehensive protection, you may want to consider special directors and officers liability insurance.

6. Failing to get frequent policy reviews and updates

Your financial life isn’t static, and neither are your insurance needs. The value of a collection may increase; extensive home renovations could mean a sharp rise in the value of your property; and the re titling of assets as part of your estate plan—or because of divorce, a death in the family, or the birth of a child—could necessitate policy changes. Even lacking major events, you probably need a comprehensive review of all your insurance coverage at least every two years.

7. Ignoring Financial Conditions

The main key so that insurance payments remain smooth is to adjust to financial conditions. When finances recede, the ability to pay inevitably diminishes. To anticipate this, choose an insurance premium with a range of costs that can still be reached. The sum insured you get may be less than the one paying a large premium. But, why pay more if you can't afford it? Try to keep the pegs no bigger than the poles so that financial conditions remain stable.

8. Paying Insurance on Credit

When you force yourself to pay a large premium, which was previously done in cash, in an instant it turns to paying it on credit. This will certainly damage your financial condition, especially if it is done continuously. In order to anticipate the occurrence of payments by credit, it is not wrong if you pay a premium for one year at a time. Of course, you don't have to worry about the cost of insurance when financial conditions are receding. Because indeed, you have paid insurance premiums in advance.

9. Insurance is used as an investment

Many people make insurance as a field to invest. Insurance owned by people with this type is usually more than one company. Even though one company should be enough, especially if the company offers various benefits. Keep in mind, insurance is a tool to protect yourself, not to enrich yourself. Even though the sum insured is greater than the premium paid, the amount is still unpredictable. So, don't expect insurance to give you maximum investment returns as you expected at the start.

10. Assuming Insurance is Everything

The assumption that the insurance company is ready to pay all your medical expenses should be eliminated. This is because the sum insured is limited and cannot be disbursed at the same time. It would be better if you keep preparing savings or investments to finance health. Take advantage of youth to work productively. Allocate some of your income for needs in old age, because the arrival of disease is unpredictable. Instead of frantically looking for a loan to pay for treatment, it's better to prepare an umbrella before it rains.

11. Joined Life Insurance as a Child

It's fine if you enroll your child in insurance since he was a child. However, adjust to the needs of the child. Don't be too young to have registered for life insurance, because small children will not feel the maximum benefits from this type of insurance. Instead, you can enroll your child in education insurance considering the cost of education is getting more and more expensive. When your child grows up, you can use insurance to pay for all of your child's educational needs. But with a note, you have to wait until the education insurance matures so that the money can be used as needed.

12. Loss of Important Documents

Just like when registering for insurance, to withdraw insurance there must also be the necessary documents. Make sure you keep all important documents, especially insurance policies and identity cards. If at any time you want to make a claim, the claim can be processed faster by the company. Keep a good variety of important documents that exist. Put important documents together in a folder, then store them in a safe place so that documents are not scattered. If you need it at any time, you don't need to be busy looking for important documents because everything is already available in the folder.

That's 12 Common Property Insurance Mistakes to Avoid You Could Lose Everything

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