Buying homeowners insurance policy to protect your most valuable asset is something that you need because it financially protects you from an unexpected loss so it is important that you find the best Louisiana homeowners insurance policy for you.
If you choose the wrong policy or make a mistake,
your policy could not respond to a claim and you could be financially devastated.
What are some common mistakes you need to know about?
1. YOU BUY THE WRONG COVERAGE
You decide to purchase a house, buy a homeowners policy and intend to move into the property.
After a few months, something changes and you decide to “flip the house” and put it up for sale.
There is a vacancy clause in a homeowner policy contract.
The usual clause is between 30-60 days. Some policies will exclude theft and vandalism if the property is vacant over a certain time frame and other companies will exclude coverage and void any future claims.
If you buy a house and the intended occupancy is “vacant”, you need to purchase a Vacant Dwelling Policy.
Vacant Dwelling policies can be purchased as 3,6,9 or 12 month terms.
2. YOU DON’T BUY ENOUGH COVERAGE
You get a great deal on a house and you borrow $100,000, but the replacement cost of the house is $300,000.
You determine you only owe $100,000 so that is all you need to insure the house since that is the loan value.
The problem is homeowners and dwelling policies have a Coinsurance Penalty Clause built into the policy contract.
The clause will state you have to insure the property at least 80-90% of the replacement cost.
If not, your claim payment will be reduced by the amount you under insured your property.
ex) 300,000 replacement cost of the house.
You insure it for 100,000.
You under insured the property by 50%.
The house burns down and you expect a check for $100,000 but since you under insured the property by 50%, your claim check will be reduced by 50%.
So $100,000 Dwelling Amount on the policy minus 50% penalty = $50,000 claim payment to you on a total fire loss.
3. YOU PURCHASE A HIGH DEDUCTIBLE TO LOWER THE PREMIUM
This is a legitimate option to Louisiana property owners to lower your rate, but you must determine you can absorb the deduction (deductible amount) from a claim check.
We have customers that take on a 10,000 deductible on properties to lower the premium, but this is not a good option for most homeowners and we don’t recommend a 10,000 deductible.
ex) An overflow of an upstairs toilet floods the house.
The flooring and sheetrock are destroyed on two floors.
It results in a $15,000 claim, but the company deducts $10,000 from the claim check.
You now only have $5,000 to repair your house.
If you don’t have the money to pay for the repairs, you will be left living in a damaged house.
4. YOU DON’T HAVE PROTECTION FROM THE LOUISIANA GUARANTY ASSOCIATION
In 1970, the Legislature created the Louisiana Insurance Guaranty Association (“LIGA”) as a private, non-profit entity designed to create a safety net for insurance consumers if their insurer becomes insolvent during the period of their policy coverage.
Before you purchase a Louisiana Home Insurance policy, you should ask if the insurance company is protected by LIGA.
Every homeowners policy insured by an admitted insurance company in Louisiana is protected up to $500,000 insured value.
Think of your money in your local bank is insured up to $250,000 deposit if the bank becomes insolvent.
LIGA is the same protection for your house if the insurance company leaves the state and becomes insolvent and can’t pay any claims.
5. MATERIAL MISREPRESENTATION ON THE APPLICATION
Most home insurance applications include this statement
“Any person knowingly and with intent to defraud any insurance company files an application or statement containing false information could result in denial of future claim payments or result in the policy being voided”
Make sure you read the entire homeowners application before you sign it and answer every question accurately so you will be covered in the event of a claim.
The fundamental principle of insurance is to be covered financially in the event of an unexpected and sudden loss.
Don’t make the mistake of blindly signing the insurance application the agent or company prepared.
In Louisiana, you will be responsible for the statements on the application you signed.
A few days ago a customer asked us how he could find the best affordable homeowners insurance policy to insure his new home purchase.
After speaking with the customer we agreed on a home insurance company that was able to fit his needs and he went on to the real estate closing happy as a new home buyer.
So if you are thinking about buying a new home….
What is the best way to find the right insurance policy for you?
The single best option is to ask your friends or family where they have their insurance policy and if they are satisfied with the service and the coverages provided by the Insurance Company.
But be careful who you ask.
What if you decide your friend Bob is your best choice for advice.
What if Bob makes every decision based on “price” or “the cheapest”?
How do you know if Bob is cheap?
Here is a old joke about your friend Bob.
After being away on business, Bob thought it would be nice to bring his wife a little gift.
“How about some perfume?” he asked the cosmetics clerk.
She showed him a $50.00 bottle.
“That’s a bit much,” said Bob, so she returned with a smaller bottle for $30.00.
“That’s still quite a bit,” Bob complained. Growing annoyed, the clerk brought out a tiny $15.00 bottle.
“What I mean,” said Bob, “is I’d like to see something really cheap.”
The clerk handed him a mirror.
What is wrong with buying insurance that is the “cheapest”
There will always be one company that is the cheapest.
There will always be one company that will be the first to go out of business.
There will always be one company that is the first to stop writing and leave the state.
Be careful of the cheapest quote.
It could just be an introductory rate followed by a 25% rate increase at renewal.
Rate Stability is a very important factor when shopping for homeowners insurance.
If you’d like to work with a local independent insurance agent who will listen to what you need and protect the assets you worked so hard to buy,
give us a call at 504.348.3131 or you can complete the form below to begin.
What’s this all about?
Take your time and research the homeowners insurance company when you are looking to buy a new home insurance policy.
Claims service is sometimes more important than price.
Rate Stability over the past few years may be something you need.
Don’t always buy the cheapest quote you get.
Most clients call us with the goal of finding the cheapest home insurance policy, but claims service, premium rate stability and insurance agency staff customer service are all key factors to consider.
Be sure to avoid the above mistakes Louisiana Homeowners make each day.
Protect yourself and more importantly your property you worked so hard to acquire.
WE MAKE IT EASY TO CONTACT US
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