Are you buying your first home and now need homeowners insurance? If so, you may not know if you are making all of the right decisions. There are mistakes that can be made when purchasing homeowners insurance, which is why you should be aware of them before you get your policy.

Buying Too Much Insurance

While it is good to have enough insurance to cover your home and the property inside, buying too much insurance means that you're going to be paying a higher premium in the end. This is due to new homeowners not realizing there is a difference between how much it will cost to completely rebuild a home and what they paid for the home.

Homeowners insurance is meant to protect you in a total loss situation, such as a fire or natural disaster that destroys the entire home. A worst case scenario involves rebuilding the home from the ground up. In this situation, you do not need to pay for the land again or any increase in cost due to the community you live in. Insurance covers the cost of demolition of the old home and the construction of your new home in its place.

The insurance provider will only cover the costs of building a similar home to what you had before, so any upgrades you want to make during construction won't be covered. That is why it is worth it to only have enough insurance to cover the cost of building the home again.

Assuming All Personal Property Is Covered

You may have coverage for personal property within your home, but a common mistake is assuming that everything you own is covered. There are often limits placed on personal property that you need to be aware of. For example, you may not have coverage for jewelry worth over a certain dollar amount, guns, or artwork. You will need to purchase a floater policy in addition to your primary policy to cover these other items.

If you run a small business, basic home insurance will not cover the items related to your business either. You'll need to get a separate policy to make sure all equipment, inventory, and other important items are covered while inside your home.

Home insurance is one of the big costs of home ownership, so you want to make sure you are doing it right. Reach out to a local insurance agent in your area for help selecting the right policy.