Sure, buying a condominium can be incredibly exciting. However, with so many things that can and will go wrong, it would make sense to take precautionary actions to ensure your investment is safe. One of these actions is to buy condo insurance.
Sure, condo insurance is generally a good idea, but it is also essential to understand the details of one’s coverage. Failure to do so can lead to significant losses, and so you must avoid this mistake to ensure you don’t waste money on the wrong insurance.
That said, we want to help you make the right decisions by sharing with you the common mistakes people make when buying condominium insurance:
Mistake 1. Picking Cash Value Reimbursement Over Full Replacement Cost
People often choose cash value reimbursement over full replacement cost coverage because more money is saved. However, when you select the latter, the insurance company will pay you for the actual cost of the structure and its contents. So, if your condo and all its contents are worth $300,000, you will receive $300,000.
This is because a cash value reimbursement only takes into account the cost of the condo when you initially bought it minus any depreciation. This, of course, means that the money you get in the end will be much less compared to total replacement, which is something you typically do not want to deal with. Sure, a policy with full replacement has higher premiums, but when disaster strikes, you will wish you had it!
Mistake 2. Not Reading Through The Fine Print
We cannot stress this enough, but your best defense against making mistakes that can ruin your investment is to read through the fine print of your coverage.
“Fine print” are the sections of your insurance policy that are so small and hard to read that they are often overlooked. However, they can say a lot about what you are covered and not covered against, and you will want to make sure you don’t miss out on vital information that could cost you in the end.
Mistake 3. Not Understanding Exclusions
There are certain circumstances that are not covered by your insurance. For example, losses that result from acts of war, extremely large damage that does not occur all at once, or flood damage because you failed to carry flood insurance are some examples of things not covered by insurance,
To make sure your condo is as safe as possible, you need to know exactly what to look out for and make necessary arrangements to ensure you don’t fall into the traps of these exclusions.
Mistake 4. Not Knowing Your Deductibles
A deductible is the amount of money you will have to pay should something go wrong. It’s a set amount that you must pay should you want to receive compensation from the insurance company, but it’s also something that should be maintained as low as possible.
The lower your deductible, the higher your premiums will be. However, you should be wary of policies with deductibles that are low to begin with, because they might tempt you to spend more money than you should on things you don’t need or things you can do without.
Making mistakes don’t happen often, but they can happen, especially if you don’t know what constitutes a mistake and how to avoid them. That’s why you should at least be aware of these common mistakes when buying condo insurance. After all, your investments are worth a lot, and you would be remiss if you didn’t take action to protect them!
Jeff Bernard specializes in high-net-worth insurance products to help wealthy individuals avoid, reduce, and manage risks. If you’re looking for an insurance broker to cover your condominium, get in touch with us today!