A study by Nationwide suggests that two out of three homes in the United States are underinsured – some by as much as 60%. Homeowners who are underinsured cannot protect their home against damage. If they suffer a loss, they will be responsible for paying for repairs.
To make matters worse, homeowners who have less than 80% of the needed coverage may be hit even harder if their policy contains a coinsurance clause. This clause states that claim settlements will be reduced by the percentage that a homeowner is underinsured below the 80% mark.
At Aftermath Adjusters & Consulting LLC, we suggest homeowners do several things to ensure that they have the coverage they need for their home.
#1. The Minimum May Not Be Enough
If you are a homeowner with a mortgage, you will be required to have enough insurance to cover the balance of your loan. However, for most people, this is not enough coverage. You’ll want to be sure that you have enough coverage to replace your home, not just pay off the mortgage.
Additionally, you will want enough liability protection and content insurance. Experts suggest having at least $300,000 in liability coverage. They also suggest having enough coverage to replace your personal possessions. The best way to have enough coverage is to conduct a home inventory.
#2: Modify After Renovations
Although your homeowners policy may have been sufficient before renovations, it might not be afterward. That’s because remodeling can raise the value of your home, which is a good thing unless you forget to increase your insurance.
Renovations to consider, include:
- Adding or remodeling bathrooms
- Remodeling the kitchen
- Converting a garage to living space
- Adding an outbuilding
- Renovating a basement or attic space
- Adding a deck
Additionally, you may also want to add liability insurance if you have added things more likely to cause injury to guests. This can include such things as a trampoline, deck, or swimming pool.
#3: Get an Endorsement for Excluded Personal Property
Your insurance policy likely excludes certain personal property. This includes items of high value such as:
- Fine art
- Coin collections
- Other collections, such as baseball cards, stamps, etc
While thinking of endorsements, consider others you may need. These might include sewer and sump pump backup, home-based business coverage, and power surge coverage.
#4: Know What Your Policy Excludes
There is nothing worse than believing you have coverage for an event only to find out that your policy excludes coverage. Some typical coverage that is excluded and will require either a policy or a rider include:
- Flood insurance
- Liability coverage for dangerous dogs
#5: Consider Replacement Coverage vs Actual Cash Value Coverage
Actual Cash Value (ACV) coverage will have significantly lower premiums because it only covers the depreciated value of your home and personal property. In other words, if you have a 10-year-old television, the ACV policy will only give you the amount a 10-year-old television is worth. Replacement coverage, on the other hand, is more expensive but will replace the television with a new one regardless of its age. In most cases, having ACV coverage will leave you woefully underinsured.
It’s Time to Check Your Policy
The best time to figure out that your policy is not sufficient is before you have a claim. Here are some things you can do today:
- Review your policy
- Look at the checklist above
- Determine the cost of homes in your area to see if your coverage is enough for a replacement home
- Conduct a thorough personal property inventory
- Call insurance companies for quotes
Reviewing your policy is something you should do every year. You can call Aftermath Adjusters & Consulting, LLC today for a free policy review. Let us help you keep your home safe.