With hurricane season in full swing and the ferocity of some recent storms across the nation, it’s a good time to take a careful look at your homeowner’s policy to see what it covers. Failure to insure your home for enough to cover the replacement cost if it’s destroyed is the biggest mistake many homeowners make. A recent study by consumer advocacy group United Policyholders found that 2/3 of U.S. homes are underinsured. Why does this happen? Because move homes are insured for the amount of the mortgage which could be only 80 to 90% of its value, depending on the down payment. And it could be much less if the home has appreciated in value since its purchase.
Another reason for being underinsured for those that do have coverage in the amount of their home’s value, is that the cost of rebuilding can be even higher than the current value. The cost of labor and supplies changes over time according to supply and demand. And when a major disaster strikes both can be in short supply, thus increasing your cost to rebuild.
How do you find out the cost of rebuilding? You could ask you insurance agent, of course. Or for a fee, you could consult a professional home-replacement cost estimator. Another other would be to ask a local real-estate agent, builder, contractor or building association for the average rebuilding cost per square foot in your area. And finally, the non-profit group United Policy holders offers suggestions and help with many insurance questions.
Once you know the replacement cost of your home, see how that compares to your actual coverage. Some options from your insurer to keep the coverage in line with the rebuilding cost are an automatic inflation provision, extended replacement coverage (pays 124% of home value), or the top of the line guaranteed replacement cost provision. These will add and additional cost to your premium, but also add additional peace of mind to your well-being.
Or here’s a simple alternative. The Eriesure home insurance policy features guaranteed replacement cost, so you never have to worry about not having enough coverage to rebuild your home. The folks at Freedom Insurance can tell you all about it.
And don’t forget about the valuables inside your home. They need protection, too. Now is a good time to take an inventory of you antiques, art, jewelry, and even your computer equipment and electronics. (Visit KnowYourStuff.org for a helpful, free inventory app.) Check with your agent to see what they would pay if it were lost or damaged. You may want to consider a rider for these items as there is often a limit on them in your basic coverage.
You never know when a storm will turn in your direction putting your home in danger. Plan ahead this summer. Know your coverage. Freedom Insurance can help! Give us a call and we’ll be happy to answer all your insurance questions.
