1. Insuring a home for its real estate value rather than for the cost of rebuilding. When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings.

  • A better way to save: Raise your deductible. An increase from $500 to $1,000 or $2,500 could save up to 25 percent on your premium payments.


2. Selecting an insurance company by price alone. It is important to choose a company with competitive prices, but also one that is financially sound and provides good customer service.

  • A better way to save: Check the financial health of a company with independent rating agencies and ask friends and family for recommendations. You should select an insurance company that will respond to your needs and handle claims fairly and efficiently.

3. Dropping earthquake insurance. Damage from earthquakes is not covered under standard homeowners or renters insurance policy. Coverage is available from the California Earthquake Authority (CEA), as well as from some private insurance companies.

  • A better way to save: Before purchasing a home, check with the CEA to determine whether the property is located near a higher risk earthquake zone; if so, consider a less risky area. If you are already living near an earthquake fault, consider retrofitting your home so that you can reduce your risk of earthquake damage and consider purchasing earthquake insurance.


4. Only purchasing the legally required amount of liability for your car. In today’s litigious society, buying only the minimum amount of liability means you are likely to pay more out-of-pocket if you are sued—and those costs may be steep.

  • A better way to save: Consider dropping collision and/or comprehensive coverage on older cars worth less than $5,000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. 

5. Neglecting to buy renters insurance. A renters insurance policy covers your possessions and additional living expenses if you have to move out due to an insured disaster, such as a fire. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.

  • A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto and life will generally provide savings.