Buying a home is a big and expensive decision. Where price certainly was a factor in which house you made an offer on, your decision was based off of other factors such as neighborhood – you want to live in Lakeview not Uptown – number of bedrooms/bathrooms, the size of the yard, proximity to cafes and restaurants, school district – Orleans vs Jefferson, etc.

In the same way price did not completely drive your house purchase, be careful not to completely let it drive your home insurance purchase. When price is the sole factor in any buying decision it could lead you to making mistakes.

With the right insight and help, it is possible to not make the mistakes that some homeowners make when buying insurance.

Here are six mistakes to avoid when purchasing homeowners insurance:

1. Selecting the wrong company

Remember, you’re purchasing insurance to protect your home investment, which is why it’s important to make sure the insurance company you work with is solid financially, and not just the cheapest. Do your homework and shop around. Base your decision on the stability of the company, how long they have been in business, their customer service and process of handling claims.

2. Choosing actual cash value instead of replacement cost

Another common error homeowners make is purchasing a policy that pays out the actual cash value of their belongings instead of the replacement cost. The problem with this is that many of your belongings will be much more expensive to replace than they are actually worth at the time of the loss. For example, it might cost $1500 to replace your TV but at the time of loss it’s only worth $200. If you choose actual cash value in your policy you will have to cover the difference out of your own pocket.

3. Buying less coverage because of price

Less coverage will obviously be cheaper, but think about how this will translate for you in the long run if you ever need to file a claim—it means you will have less coverage and will have to pay more out of your own pocket. If you are looking to lower your costs, a good option is to get the right amount of coverage and increase your deductible, this gives you the protection you need at a reasonable rate. Your mortgage company will typically require you to carry a certain amount of coverage.

4. Not getting flood insurance

We live in New Orleans. Even if your property is located in a non-flood zone (also referred to as a Prefered zone or X zone) buy flood insurance. New Orleans is a flood zone.

5. Not asking the right questions

All insurance can be confusing and homeowner insurance is no exception. The most important thing you can do is ask your agent lots of questions before purchasing a policy. Here are important questions you should ask:

  • Are there any coverage exclusions I need to know about?
  • Why do I have 2 deductibles and how do they work?
  • How do you handle claims if I need to file one?
  • Am I getting all the discounts available ?

6. Not meeting your insurance agent

Especially if you are buying a new house, make sure you speak with and get to know your insurance agent. Often times with new purchases it is the real estate agent that manages the insurance relationship. However, after you close on your new house your relationship with your realtor ends but your relationship with your insurance agent will remain ongoing.

Find the coverage that meets your needs

Being aware of these common mistakes will help make sure you purchase the right amount of coverage for your new home. If you have any questions about your current homeowners insurance, talk to your agent! It’s always possible to adjust your coverage to better fit your needs.