First-time buyer? 5 mistakes that could cost you

Pitfall No. 1: Underestimating the cost of a claim

When people think of a water loss or sewer backup, they often picture a relatively minor repair bill. But the biggest costs are often the ones you don't see.

Before choosing a coverage limit, consider everything a loss could involve:

• Replacing damaged belongings at replacement cost, including furniture, appliances and basement equipment.
• Paying for emergency response, demolition and decontamination. These costs alone can add up to thousands of dollars and are generally covered by your insurance limit.
• Repairing damaged flooring, walls, paint, or even an entire bathroom.
• Covering temporary living expenses if your home becomes uninhabitable during repairs.
• Having excavation work carried out to access a damaged pipe or French drain.
• Rebuilding outdoor features that must be removed to complete repairs, such as a driveway, patio, walkway or rock garden.

A good rule of thumb

Think beyond the value of your belongings. Instead, consider what it would cost to bring your home back to the way it was before the loss. Your insurer can help you choose the level of coverage that’s right for your needs.

Pitfall No. 2: Thinking you’re covered for everything

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.

A good rule of thumb

Many first-time buyers think that “All-perils” insurance covers everything. That’s not entirely true. It does protect against a wide range of incidents, but it has its 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 hot tub, with replacement cost coverage available only for the first few years.
• 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 when 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 who’s covering the difference? Alexander was on his own to cover groceries, utilities and condo fees.

A good rule of thumb

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. You don’t get to choose your beneficiary. 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: Letting price be the deciding factor

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 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.

A good rule of thumg

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.
• 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?”
• Are there coverages available that are not part of my current policy?

Pitfall No. 5: Forgetting to update your policy after upgrades

Sophie and Mark have poured their hearts and a lot of money into their home. Today, their property is worth much more than when they first bought it. But when that part of the house was damaged by a fire, the payout was calculated on the pre-remodel value.

A good rule of thumb

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:

• Let your insurer know if you're planning major renovations so your reconstruction value can be updated beforehand.
• 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.