An underinsured home can put you at risk. If your home were completely destroyed in a disaster (which could happen to anyone at any time), you’d only get paid out the amount your insurance limits dictate. If you don’t have the right amount of coverage, you could end up thousands or hundreds of thousands in the hole looking to repair or replace your home.
Unfortunately, too many homes are significantly underinsured. Sometimes homeowners don’t know they don’t have enough coverage, or they’re undercutting their insurance in the hopes of lowering their premiums.
On the flip side, you also don’t want to overpay if you have too much coverage that you don’t need. This often happens if people downsize their possessions or they aren’t aware of the policy that they’re paying for.
So let’s make sure you’re getting the right amount of homeowners insurance coverage to protect your home—and at the right price. Answer the following questions to determine if you have enough homeowners insurance to safeguard against disaster.
How to determine if you have enough homeowners insurance coverage
Does your dwelling insurance cover the cost of rebuilding?
You want your homeowners insurance to be able to replace your home in the case of a total loss. So if a hurricane or fire completely destroyed your home, you want to make sure the limits of your homeowners insurance would be enough to replace all of the damages.
This starts by rebuilding the actual structure of the home. That’s what dwelling coverage is for.
What factors contribute to rebuilding costs?
- Square footage of structure
- Local construction expenses (materials + labor0
- Number of rooms
- Style of house
- Exterior wall construction (frame, masonry, or veneer)
- Type of materials used
- Roofing materials
- Additional structures like garages and sheds (which falls under additional structures coverage)
- Special features like trim or fireplaces
- Improvements that have added value to home
You shouldn’t try to come up with this number yourself. The cost of rebuilding is not going to be the same as the current market value of nearby homes nor the price you paid for it.
To get the most accurate replacement cost value, you want a reputable appraiser or contractor to give you an estimate. Then, you and your insurance company will come to an agreement on a fair cash value payout for the structure of your home with your dwelling coverage.
Does my contents coverage include all of my possessions?
If your home were completely destroyed, you’d also lose all of your possessions inside the home. Contents coverage helps cover the cost of these items, so you could replace them if they were destroyed or damaged.
You want to ensure your home inventory is up to date to ensure that all of your possessions would be covered in the case of a claim. If it’s not on your inventory, it’s not covered!
Let’s say you bought a new TV last week. This week, your house is hit with a flood that destroys almost all of your possessions. If you haven’t told your insurance company about the new TV, they won’t reimburse for that TV because it’s not on your home inventory.
Check out these home inventory apps to keep your contents coverage up to date!
Read: A guide to insuring valuables with homeowners insurance
Do your valuables need a special rider?
Some possessions aren’t covered under traditional contents coverage, like jewelry, fine art, antiques, collectibles, furs, musical instruments, and cash.
You’ll want to be aware of what your standard homeowners’ policy excludes from coverage, so you can purchase a supplemental rider to keep these items protected.
Learn more about the things to get insurance riders for as a homeowner.
Does your homeowners’ policy meet your lender requirements?
If you have a mortgage, the lender usually requires a certain amount of homeowners coverage to protect their asset. Make sure you get this number from your mortgage representative, and talk to an insurance agent to make sure your coverage limits meet your lender’s requirements.
Do you have flood and earthquake insurance?
Most standard homeowners policies don’t cover damage from flood and earthquakes. That means if your home were destroyed by either of these natural disasters, you would be paid nothing.
Purchasing supplemental flood and earthquake insurance policies can be crucial to maintaining and protecting your home. In general, you want enough flood and earthquake coverage to cover all of your dwelling and contents coverage. These should mimic the limits of your standard homeowners policy.
Do you need business insurance?
If you conduct any business out of your home, business-related expenses might not be covered by your standard homeowners insurance. For example, business property like a work computer wouldn’t be covered if it’s damaged in a fire, and your homeowners liability insurance wouldn’t cover if a client sprains an ankle while visiting your home.
If you conduct any business from home whatsoever, you’ll want to consider looking into business insurance alongside your homeowners insurance.
Could you benefit from an umbrella policy?
An umbrella policy offers an extra layer of liability for you and your family. This means it doesn’t actually cover your own home. It covers any incidents that you cause harm to another person. For example, if your dog bites someone, their medical expenses would be your responsibility. Or if you play on a rec sports team and accidentally trip someone, you’d be liable for their expenses.
Umbrella policies are a good idea for anyone and everyone—because no one is immune to liability. For a low premium cost, you can get over a million dollars in liability insurance that can save you and your family a lot of headache
Get the scoop on umbrella insurance here.
When was the last time you compared homeowners’ quotes?
Not sure if you have enough coverage? Not sure if you’re paying the right amount of money for the coverage you have?
It doesn’t hurt to shop around for homeowners insurance every once in awhile to make sure you’re getting appropriate coverage at a fair price.
Check out this quick and dirty guide to comparison quote shopping for more info.
Make sure you have enough homeowners insurance coverage. Compare home insurance quotes quickly and easily with one of our expert insurance advisors at (844) 522-0543.
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