Jan 18, 2008

Underinsuring a Home on Consumer Reports' Top 12 Blunder List

Yes, we harped on it in our book (Nolo's Essential Guide to Buying Your First Home), but it's nice to have confirmation from Consumer Reports nonetheless:

Buying homeowners' insurance is not a time to go cheap and get the minimum. In fact, buying too little insurance is listed in a story in Consumer Reports' February 2008 issue as one of 12 major blunders that could cost you $1 million.

Loma Prieta houseWhy? Because the amount you're given to replace your house, in a disaster, may not allow you to rebuild what you had, and you'll lose any home appreciation you gained over time. Yes, disasters (such as fires, earthquakes, and floods) are unlikely, but the message here seems to be, why gamble on such a huge part of your life -- and your net worth?

The other major blunders are mostly focused on retirement planning and keeping yourself healthy. But when it comes to homeownership, insurance is a biggie.

Ilona Bray