• New homeowners should insure their homes properly, not make assumptions on what’s covered and consider flood and earthquake insurance.

Your buyers recently closed on a home. The paperwork has been signed, and keys have been transferred from the previous homeowner to your clients. Naturally, the next milestone is purchasing a homeowner’s insurance policy that complements both the budget and the needs of your clients.

As a buyer’s agent, you can help cultivate an understanding of the important factors new homeowners need to consider when purchasing a policy.

Here are a few pitfalls homebuyers can avoid when purchasing homeowner’s insurance:

1. Underinsuring their new home

Failing to purchase enough insurance could leave your new homeowners with thousands of dollars in uncovered damages or losses.

Outside structure: As market prices continue to rise, so does the cost to rebuild. If you only insure up to $200,000 but have $250,000 in damages, your new homeowner’s are going to be at a $50,000 deficit.

Valuables items plus: A valuable items plus places higher limits on more expensive items such as engagement rings, cameras, computers and expensive antiques. It’s good to get these items appraised for their true worth and adjust limits accordingly.

Home improvements: As time goes on, your homeowners will likely make improvements such as renovating the kitchen, bathroom or adding on an addition. When it comes to insurance, as many as 40 percent of home insurance buyers do not update their policy to match their improvements.

2. Thinking deductibles are fixed

Most people believe that their deductible is fixed in all cases. While true for many scenarios, this may not be the case for major weather events such as windstorms or hurricanes.

In those cases, the deductible may not be a fixed $500 or $1,000, but rather a percentage of their coverage amount. This creates a much higher deductible than they originally anticipated.

The best advice you can provide is to ask their chosen insurance agent about any changes in deductible amounts in accordance with the type of claim filed.

3. Assuming flood insurance is included

Baton Rouge, Louisiana/IIP Photo Archive

Many first-time homebuyers are under the illusion that flood insurance comes bundled with a homeowner’s insurance policy, or they assume they do not need to purchase flood insurance because they live in a low-risk zone.

Any experienced insurance agent will tell you that flooding can happen in any area, regardless of predicted risk. Just let the facts speak for themselves.

While Mother Nature can’t be controlled, you can equip your buyers with knowledge that can help them bypass costly mistakes.

If they need a little added persuasion, let them know that flood insurance is extremely affordable with most paying $100 or less a year.

4. Figuring mold or sewage-backup is included

While a common concern for homeowners today, many will be surprised to know that these things are not covered under a standard homeowner’s insurance policy.

Out-of-date sewage lines lead to increased sewage backup, which can damage the entire structure of a home, including floors, walls, furniture and electrical systems.

Mold has over 1,000 species that grow in the United States. Although prevention is the best way to avoid growth altogether, a small addition to their policy should protect their new home should a situation arise.

5. Opting out of earthquake coverage

Living in New England, most people choose to opt-out of earthquake insurance because seismic maps indicate that this area is at low risk for this natural disaster.

Although viewed as an educated decision for some, we would argue that natural disasters can happen anywhere at any time, even in the least likely of places.

New homeowners, especially first-time homeowners, don’t know what they don’t know, so it’s your job to help educate them before it’s too late.

Kathy Francioso is a personal lines manager at H&K Insurance Agency Inc. in the Boston area. Follow H&K on Facebook or Twitter.

Email Kathy Francioso

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×