It’s a surprising fact, really, but it’s true: most homeowners in the United States are underinsured. In fact, insurance giant Nationwide estimates that about two-thirds of homeowners don’t carry enough insurance coverage to protect themselves in the event of major damage or destruction due to fire, flood, or other disaster. While this is a sobering thought, the truly sad part is that most homeowners don’t even know they’re underinsured until it’s too late. This is why it’s imperative that you review your homeowner’s insurance policy each year. Make an appointment with your insurance agent and use some (or all!) of the following tips to make sure you’re sufficiently covered.
Avoid Minimums
If you have a mortgage, your lender requires you to carry a minimum amount of insurance coverage. That minimum, however, won’t necessarily cover everything if and when you need it to. All the lender wants is to protect their investment. As blasé as it may sound, all they really want is to ensure they can get their money back. Minimum coverage might help you pay them, but it won’t necessarily do anything to help your home and property. You need to make sure that you have enough insurance to cover the cost of repairing and/or replacing your home today. It doesn’t matter what the market value is. What matters is the actual amount it would take to rebuild. Instead of going for the bare minimum in coverage, look at other ways to save money, such as raising your deductible. A higher deductible can actually save you money on your monthly payments. You might also qualify for savings if you bundle your home and auto insurance.
Keep Your Policy Updated
Improving and adding onto your home is a great investment. In order to protect that investment, it’s important to increase your insurance coverage anytime you change something and add value to your home. You might groan when you think about adding certain high-risk items like a pool to your insurance policy, but the money and headache it could save you if an accident were to happen is worth the hassle and possible payment hike of adding it to your policy.
Keep Personal Property Inventory Updated
In addition to updating your policy based on the house itself, you should also update it to reflect the contents therein. Personal property that is priceless or would cost a lot to replace should always be covered. Typical coverage of expensive items like jewelry, art, and antiques is about $2,500. If your personal property is worth more than that, you should think about purchasing extra coverage for those types of items. It’s also a good idea to document your personal possessions with a home inventory, complete with receipts and photos.
Review Exclusions and Endorsements
Exclusions and endorsements are the parts of your insurance policy that subtract or add coverage. Endorsements, which are usually pretty affordable, allow you to rest easy knowing that you and your property are fully protected. You might get an endorsement for those expensive possessions discussed above, or you might get one for things like sewer and sump-pump backup; home-based business; and special personal property coverage. Exclusions, on the other hand, tell you what is not covered under your policy and help you decide whether to purchase additional liability or other types of insurance. Some exclusions might be certain dog breeds or wind and hail.
Check Your Liability Coverage
When most people think about homeowners insurance, they think about protecting their homes against damage from natural disasters, fire, flooding, and the like. Some homeowners tend to forget that liability insurance is just as important when it comes to protecting themselves and their property. For instance, what happens if someone is on your property and gets injured in some way? Liability coverage is there to help with things like property damage, medical bills, pain and suffering, lost wages, death benefits, and legal costs. It protects your home and your belongings in the event that you get sued.
Figure Correct Replacement Value
Knowing the actual replacement value of your home is key to ensuring that you have sufficient coverage. Your insurance agent can help you with this, but a good way to figure the amount is to take the current local building costs per square foot and multiply it by the square footage of your home. Certain factors can change the price per square foot, including but not limited to types of exterior wall construction, house style, number of rooms and bathrooms, type of roof, features like garages, fireplaces, and trimwork.
Check to See If You Need Flood Insurance
Standard home insurance policies do not protect against flooding. If you live in a flood zone, you probably already have flood insurance, but even if you aren’t required to purchase it, you may want to think about doing so. According to insurance.com, up to 20% of flood claims come from low- to moderate-risk areas. Just because you don’t live in a spot that floods very often, it doesn’t mean your house isn’t ever at risk for flooding. It’s better to have flood insurance and not need it than need it and not have it.
