Homeowners insurance is one of the best risk management tools available to help you protect your most important asset—your home. However, many people make mistakes when designing a policy, in part because they don't consult a knowledgeable professional for help. However, the information below should help you avoid the most common coverage errors.

5 Common Home Insurance Mistakes

1. Insuring for the Outstanding Loan Amount

Since most lenders require borrowers to maintain homeowners insurance to protect the bank's investment, some people only insure their dwelling for the outstanding loan balance. They feel this fulfills the lender's requirements at the minimum cost to themselves. Unfortunately, it leaves them vulnerable if a fire or other disaster should strike.

2. Insuring for Market Value

The market value has little to do with the cost of replacing your home. Market prices fluctuate—sometimes dramatically. What matters is the cost to rebuild the structure from the ground up. Contact a couple of builders and request an estimate for the price to rebuild. That's the amount of insurance you should buy. Any more than that and you're paying too much each month. Any less and you're leaving yourself vulnerable to out-of-pocket costs.

3. Choosing an Insurer Based Solely on Price

Don't select an insurer based on premiums alone. Make sure the coverage you're getting is what you want and that the payout limits and deductibles are the same as other providers. 

4. Neglecting Flood Insurance

Flood insurance does not come standard with most homeowners insurance policies. You must ask for it specifically, and it normally costs an additional amount. If you live in a flood plain or are concerned about rising waters, be sure to ask your agent about flood coverage.

5. Failing to Consider Deductible Amounts

The deductible is the amount you must pay before the insurer starts contributing. People who are very averse to risk normally prefer a lower deductible, even though this means they pay more each month in premiums. However, if you are more comfortable saving money each month against the possibility that you'll pay more if you file a claim one day, you might prefer a higher deductible and lower premium.

It's easy to make these common homeowners insurance mistakes without the help of a seasoned insurance agent. For expert guidance, contact Barron Mutual Insurance Company in Wisconsin. They've been serving businesses and individuals throughout the region for more than 125 years and specialize in home, farm, rental property, seasonal property, and mobile home insurance. Visit their website to request an insurance quote, or call (715) 537-5141 to discuss your options with an experienced agent.