First-time buyer? 5 mistakes that could cost you
Buying your first home brings a wave of excitement and uncertainty. You’re already picturing the fresh paint on the wall, dinner parties with friends, and weekend BBQs in the backyard...but before you throw a housewarming party, let’s talk insurance, shall we? We get it, shopping for home insurance isn’t nearly as fun as picking out curtains. But it’s what protects your entire dream. As long as you avoid the pitfalls.
Pitfall No. 1: Underestimating the cost of a claim
“A half-finished basement? $25,000 in coverage should be plenty, right?” That’s what Karim and Justine thought, until a sewer backup changed everything. Just two inches of water caused major damage. After the clean-up, they had to redo the entire basement. And since their bedroom, bathrooms, and laundry room were downstairs, they had to move out for several weeks while waiting for a contractor.
Final bill: $50,000 Their mistake? They underestimated the coverage in their sewer backup endorsement.
What to do
Many first-time buyers think a claim just means replacing a few belongings. But it often involves major repairs, debris removal, deep cleaning, and sometimes even decontamination and temporary relocation.
To avoid paying out of pocket like Karim and Justine, ask yourself what it would really cost to rebuild everything. Your insurer can help you. They have the tools to estimate the right coverage amount for your specific situation.
Pitfall No. 2: Assuming the standard contract covers all your bases
Samuel and Rose went all out on their above-ground pool: salt water filtration, water heater, a custom cedar deck, and LED lighting. It was their summer oasis.
But after a winter of record snowfalls and intense freeze-thaw cycles, spring brought bad news: structural damage to the pool, cracked heater, and several lifted deck boards. “We’ve got all-risk coverage so we should be fine, right?”, they thought when they called their insurer. It turns out that they hadn’t added the Above-Ground Pool or Spa endorsement.
What to do
“All-risk” insurance sounds like it covers everything and many first-time buyers assume it does. That’s not entirely true. While it does protect against a wide range of incidents, it still has limits. Some common types of damage require additional coverage that’s available through endorsements:
- Ground water, sewers and flooding
- Above-ground water caused by overflowing gutters or when rain or melting snow seeps through the roof or walls, for example.
- Damage to pools and spas, including coverage related to equipment and installations.
Other options to consider:
- Replacement cost coverage. It’s included in every all-risk policy so you’re covered for the full value of your building and not the depreciated amount. You’re protected against rising construction costs and inflation.
- Legal Access coverage is an affordable option that helps cover certain lawyer or notary fees and other costs in case of a dispute.
Pitfall No. 3: Beyond the mortgage: real coverage matters
Alexander and Ethan thought they were covered when they took out the bank’s mortgage coverage. Then a cycling accident changed everything. Ethan couldn’t work for months.
The bank paid part of the mortgage. But Alexander was on his own to cover groceries, utilities and condo fees.
What to do
Many people confuse mortgage loan insurance with life and disability insurance. The bank’s coverage only insures the mortgage. Period. It doesn’t cover everyday expenses.
Here’s the catch, it’s designed to protect the lender. The money goes to the bank, not your family. And because your health is assessed when you file a claim, you may be denied when you need help the most.
Secure your income, not just your loan, so that you can continue to pay your groceries and other expenses. Plan ahead to avoid needless stress when life gets tough.
- Do the math and figure out how much you’d need if your income suddenly stopped coming in.
- Choose disability insurance that covers both your mortgage and everyday expenses.
- Consider critical illness coverage which gives you a lump sum if you’re diagnosed with a serious condition.
- Review your insurance whenever life changes: marriage, kids, refinancing, salary shifts.
- Match your loan term with temporary life and disability insurance. Fixed premiums, and your coverage stays with you, even if you switch banks.
Pitfall No. 4: Going for the lowest price
After paying the notary, taxes, buying furniture, and moving, Mei and David wanted to save money for renovations. So when it came to choosing home insurance, they opted for the cheapest premium.
Big mistake. While they were away, burglars broke into their home. TVs, gaming consoles, laptops, jewellery were stolen. Plus, the house was trashed.
The claim came with surprises: a high deductible, reimbursement calculated on the home’s depreciated value, and a jewellery cap that didn’t come close to covering their loss. Ultimately, their so-called savings ended up costing thousands. And the feeling of being left completely unprotected.
What to do
Saving on premiums makes sense when expenses start to pile up. But not if it means sacrificing on coverage you really need. That bargain premium? If often comes with high deductibles, inadequate coverage, and surprising exclusions.
- Choose a deductible you can handle without breaking the bank.
- Review exclusions and add extra coverage where necessary.
- Consider increasing your liability coverage to $2 million.
- Ask the right questions: “Am I covered if my basement is flooded? What if my pool gives way under the snow?”
- And don’t forget to compare the service, not just the price. Look at responsiveness, claim turnaround, and reputation.
Pitfall No. 5: Forgetting to update your policy after upgrades
Sophie and Mark poured their hearts (and money!) into their new home: full kitchen and bathroom remodel, a finished basement and new windows. Their property was worth far more than before. But when that part of the house was damaged by a fire, the payout was calculated on the pre-remodel value.
What to do
If homeowners think their coverage stays the same, even after renovations, they should think again. Every major remodel or purchase can increase the rebuild cost, especially with the rising cost of construction material.
Bottom line: if you don’t update your policy, your coverage won’t match your home’s true value. Make sure to:
- Notify your insurer after major remodels to adjust the rebuild cost.
- Report any valuable purchases and insure them separately, if needed.
- Let your insurer know if you start renting your home or running a business from it.
- Review your coverage after major life events, so your policy evolves with the value of your home.
Insurance is more than just protection, it’s peace of mind
Your first home is exciting, but it’s also the time to safeguard your financial future. By steering clear of common pitfalls, you’ll keep your home from turning into a financial nightmare.
And because every situation is unique, Beneva can help you choose the right home insurance plus life and disability or legal coverage to protect everything you’re building.