Many families purchase insurance as a safeguard against catastrophic loss to their residence, which is the place they call “home” and a valuable investment for their future. A common misconception among policyholders is that homeowner’s coverage is uniform, so there are no significant decisions or customization required when making insurance purchasing decisions. Although there might be standard forms of coverage, the assumption that the process of purchasing homeowner’s coverage does not involve important choices can be a costly miscalculation. As an experienced Florida homeowner’s insurance law firm, we have highlighted a number of common mistakes made by homeowners when purchasing policies.
Selecting the Wrong Type of Coverage in Terms of the Valuation Process: There are two types of policies in terms of the method used to calculate the value of a claim: (1) replacement cost; and (2) actual cash value. These methods of calculating the compensation paid to an insured differ dramatically in most situations. Replacement cost policies provide an insured with a brand new version of the damaged property without any deduction for depreciation. By contrast, actual cash value only pays what accountants refer to as “book value.” This method of valuation includes a deduction for deprecation based on the useful life of an item. When an insurer evaluates home furnishings, appliances and furniture, these items often will be virtually worthless under this form of valuation. Although replacement value might be slightly more expensive, policyholders typically consider the extra financial protection worth the additional cost.
Purchasing a Policy without Assistance from an Agent: The process of crafting insurance to fit a homeowner’s needs is complicated. The mistake of assuming that “one size fits all” means that a policy will not be fine-tuned to fit your circumstances. Insurance agents must meet ongoing educational and licensing requirements, so they offer expertise in all areas of insurance coverage to prospective purchasers. Insurance agents can advise consumers about all relevant available options to enable buyers to make informed decisions. For example, carriers offer different types of coverage based on the form of occupancy. Policy coverage differs for owner-occupied housing as opposed to rental property or vacant homes. Failure to purchase the appropriate type of coverage could result in the denial of an otherwise covered claim.
Assuming a Policy Includes Flood Coverage: Many people presume that their standard homeowner’s policy includes flood coverage. If a homeowner intends to purchase flood coverage, this form of insurance must be obtained through the National Flood Insurance Program. Flood insurance provides protection against tropical storms, hurricanes, and torrential rains. Although some people procrastinate when considering this type of coverage, homeowners need to be aware that a thirty day waiting period applies between the time the policy is purchased and the coverage taking effect.
Focusing Entirely on Cost When Selecting an Insurance Company: While the amount of the applicable premium certainly is an important consideration, policyholders need to evaluate the type of coverage to determine what they might be giving up for minimal savings in premiums. The exclusion of certain key types of coverage or an insurer’s lack of reinsurance could make minor premium savings an extremely costly sacrifice in the long run.
Our Miami insurance claims law firm invites you to contact us if you are having difficulties with your insurance company. Florida insurance claims lawyer J.P. Gonzalez-Sirgo handles claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.