Five Mistakes People Commit When Buying Fire Insurance

 Make no mistake about it. Your house is probably one of your biggest investments, if not the biggest, in your lifetime, and a single fire is all that is needed to snap it from view. Examine your fire insurance. You may think you’re insured already, but be sure you have not fallen for these five mistakes people commit.

1.    Assuming that your fire policy covers your building contents. Take time to read your fire insurance policy. You might have specified the inclusion of your house contents in your discussions with your agent, but the policy does not contain it for some reasons. Some unconcerned employee from the agency office might have overlooked its inclusion.

2.    Assuming that your policy covers all types of fires. Did you want your house to be covered against fire arising from an earthquake or any other natural event? Standard fire policy provisions do not cover these unless they are specified for inclusion.

3.    Assuming that your fire policy covers the actual replacement cost of your house and other personal properties. Most policies cover the actual value (depreciated costs) of items at the time of the occurrence of fire. Know that the indemnity to you of the fire on your house and other items of property will be subject to “adjustment.”

4.    Relying solely on the recommendations of your agent on the choice of your insurance company. While you have to trust your agent’s word, prudence dictates that you do some side checking on the background and reputation of the insurance company you finally choose to do business with. A check with a friend can be reassuring.

5.    Failing to make a written list of the contents of your home. When claim time comes (let’s hope it does not), you have to have a basis for the claims you are to make against your fire policy. Having a detailed list, preferably accompanied by video or picture files, will save you the problem of identifying which property items have been lost in the event and the valuation of these properties.

There are other important considerations you must not overlook at the time that you are taking your fire policy such as the discounts offered on deductibles, on using smoke and fire detectors, or on having collateral business. These discounts can be substantial if collated together. If you already have a fire policy, a review of the provisions of your policy would offer a lot of advantage. For one, you become more aware of your coverage. For another, you may discover some information that you would not have known if you did not visit, such as your policy has lapsed!

Of course, awareness of your fire coverage will give you the feeling of security by avoiding the aforementioned five mistakes that fire policyholders usually commit. After all, did you not get that policy to have peace of mind?

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Orlando G. Javier LUTCF is a Fellow of the American College and a staunch advocate of financial wellness. He writes professionally on such topics as financial wellness, financial planning and wealth management.

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