Is Your Home Over- or Under-Insured?

Shoes that are too tight can hurt your feet. Pants that are too loose will fall down. Whatever clothing you’re putting on your body, it’s important to find the right fit if you want to look and feel your best. The same can be said about homeowner’s insurance. If you purchase more coverage than you need, you’re wasting money. But if you underinsure your home and possessions, recovering from a burglary, fire, flood or other natural disaster could be even more costly.

You need homeowner’s insurance with coverage that’s just right for you. And with a little time for research and a few conversations with your insurance agent, it’s absolutely possible to get it.

Begin by reviewing your current policy. Will it reimburse you for the value of your home and property based on its current condition (actual cash value coverage) or will you receive the funds required to replace what you’ve lost (comprehensive replacement cost coverage). Depreciation will hurt you if it’s the former. The age of your home and belongings doesn’t factor into the equation with the latter.

Make sure your coverage limit is high enough. You’ll need enough to fully cover the costs of rebuilding your home (excluding the value of the land) and replacing the rest of your property. In the case of your residence, this is not the same as current market value. Rebuilding could cost more—or less—than what your home would sell for today.

Take a look at local construction costs. If you recently purchased a newly built home or refinanced a mortgage in the last year, the appraisal should offer a fairly accurate representation of replacement cost as well as actual cash value and market value. If you own an older home, talk to local homebuilders about the average cost per square foot of construction. Then purchase coverage accordingly.

Account for upgrades. If you’ve spent at least $5,000 on remodeling projects since you last adjusted your homeowner’s insurance policy, you should consider increasing your coverage. If you’ve made any other high-ticket purchases or the value of the items in your home has otherwise increased, you should also adjust your coverage.

Buy endorsements as necessary. If your policy only provides actual cash value on contents, you may be able to purchase an endorsement to receive replacement cost value. If you own valuable items that aren’t covered by the standard policy, you can purchase endorsements for those as well.

Don’t forget your liability coverage. By some accounts, the average liability claim for bodily injury and property damage is nearly $16,000. If you have a gathering at your home and someone falls down the stairs, or a delivery person slips on your icy sidewalk during the winter, being underinsured will hurt you.

If you’re worried about the cost of fully insuring your home and belongings, we may be able to help you find ways to make your premiums more affordable. These include bundling endorsements, eliminating unneeded riders, and adjusting payment limits on a variety of claims. Give us a call today to review your current policy and discuss money-saving options.