The Total Coverage Blog
Over the last couple of years, the phrase “home sweet home” has started to carry a little extra weight. “Home” means more to us now than ever before. However, when it comes to protecting our homes, the majority of the US population is not doing enough. According to CoreLogic, three out of five US homes are underinsured by an average of 20 percent.
So what does this mean for you if you’re underinsured? As a homeowner, any gaps in your insurance coverage are your responsibility. Essentially, if you were to lose your home to a covered peril (insurance talk for a danger or hazard, ex: a fire), you would likely have to pay some money out of your own pocket to fill in those gaps and rebuild your home just as it was before.
How did we get to a point where 60 percent of homes in the US have major gaps in coverage? There are a few reasons; Inflation, inadequate policy limits, and undocumented home renovations are three major causes of being underinsured.
Is there anything you can do as a homeowner? OF COURSE! Let’s talk this out…
The Inflations are a tough group to keep up with. While most insurance policies account and adjust for inflation, sometimes those adjustments are unable to keep up, causing you to have an underinsured home.
Let’s say your home is insured using a market value of $300,000 (think of it like how much your home would sell for on the market). Suddenly, a fire claims your entire home. Because of inflation, your home is going to cost $350,000 to rebuild. A large part of this increase comes from the prices of building material, which have risen over 30 percent since January of 2020. Unfortunately, this scenario leaves you footing the bill for the extra $50,000 it’s going to cost to rebuild your home.
Pro Tip: Guaranteed Replacement Cost is an optional level of coverage that helps to avoid gaps in coverage caused by inflation.
Speaking of coverage….
As a homeowner, you should feel comfortable about your coverage limits. Your policy should show your limits, but you can always call and check with your local agent (we hear those people at Unruh are pretty great).
One thing to think about here: If you opted for a cheaper policy to save money and satisfy your mortgage lender’s requirements, you may want to have that coverage wellness check sooner rather than later. The reason is because with a cheaper policy comes lower limits and bigger coverage gaps.
Perhaps you’ve now been living at your home for a few years and are in a better place financially. Revisit those limits ASAP.
And let’s not forget to talk about reporting your home renovations.
Perhaps this one is easy to overlook. But if you’ve made any significant home renovations above $5,000, you’ll want to let your insurance agent know immediately so you can adjust your homeowners insurance accordingly.
Let’s say you’ve saved up for that basement renovation with a full theater setup complete with heated recliners and a popcorn machine to boot. Family movie night will never be the same with your $20,000 upgrade. The changes raise your home value. Cool, right? We think so too. But say you didn’t inform your insurance agent of the changes…your insurance policy is likely still covering your home as it was with an unfinished basement. So if you experience a total loss, you may end up being underinsured and not having enough to rebuild your theater setup. That’d be a bummer.
Simply put, you can contact your local insurance agent to make sure your home is not underinsured. A short checkup is a good idea if it’s been a while since you’ve checked in or if you’ve made any renovations above $5,000. The important thing is that you feel comfortable with your level of coverage.
If you need to check in on your homeowners insurance, feel free to give us a call. If you’re looking for a homeowners insurance quote, click below.