Five Biggest Mistakes Made When Buying Home Insurance
Are your customers thinking about purchasing a home? Then they’ll need a homeowner’s insurance policy. First off, tell them not to worry. If they’re able to muster up enough patience for the home buying process, then getting home insurance is a cinch. Still, there’s a right way and a wrong way to do it. Make sure they’re not committing one of these five big mistakes.
One: Buying On Price Alone
The average customer can get pretty near-sighted when it comes to finding the best deal on home insurance. And now that so many technologies are out there to empower the consumer, there is a greater risk that they will make a buying decision based on a simple observation like premiums. Big mistake. Why? Because in their short-sightedness, they may be leaving key coverages and discounts on the table.
Two: Getting Complacent
Some customers fail to exploit the advantages of their situation and/or policies. Instead of taking advantage of key initiatives that might result in additional discounts — like installing smoke or security alarm systems or seeking age preference discounts — they go on paying the same price year after year. As an agent, you have a key opportunity to guide them toward the cost-saving measures that will put more money back in their pocket. Want to build a loyal clientele? That’s how you do it.
Three: Not Consolidating
Most companies reward multiple policyholders with across-the-board discounts, some as high as 25 percent! Whatever the final number is, one thing is certain: a customer saves way more money when he buys life, auto, and home from the same company. Many customers, thinking they’ll get a better deal if they just use technology to price comparison shop, will fail to realize this huge savings opportunity. They mistakenly think they’re getting a great deal when they’re actually paying much more for what is often less coverage.
Four: Not Insuring Your Home For The Cost Of Rebuilding
Many homeowners mistakenly believe they should purchase just enough coverage to meet the cost of what their home is worth. The problem with this line of thought is that while the value of a home may appreciate at around two percent per year, the cost of building usually rises at a much higher rate. By failing to insure a home for cost of the rebuild, they guarantee that, should a calamity occur, they’ll end up with a smaller house. Therefore, it’s important to educate customers on the value of insuring for the rebuild cost, and for frequently adding coverage to keep up with the market.
According to Travelers Insurance, the main factors to consider when calculating the rebuild price are:
- Total living area (square footage of home)
- Style of home (e.g. ranch, contemporary, colonial)
- Exterior wall construction (e.g. frame, brick)
- Number of kitchens and bathrooms and quality of materials
- Garage type (e.g. attached, detached, built-in)
- Special features (e.g. fireplaces, porches, skylights)
- Additions or enhancements (e.g. finished basements; in-law apartment)
Five: Failing To Get Flood Insurance
The standard homeowner’s insurance policy does not cover flood damage. That is handled via the National Flood Insurance Program. Coverage is very minimal, and it can save thousands upon thousands of dollars in the event of a flood. Customers looking to cut corners on costs should not start here, especially when they live in highly susceptible areas.
The insurance agent’s role is as much about education as it is selling policies. By making sure that your customers have the information they need to succeed, you can make them lifelong clients and ensure they’re protected when life gets unpredictable.