Is Your Home Insured at the Correct Value?
Homeowners insurance is essential for protecting yourself, your home and your belongings. However, the policy you first purchased when you bought your home may not provide enough coverage years later. In fact, two out of every three homes in the United States may be underinsured, according to industry experts; this translates to millions of homes at risk of significant financial losses if an unexpected incident occurs.
How to Know if Your Home Is Underinsured
When a home is underinsured, there may not be enough coverage to fully repair your home or replace your belongings after an incident, such as a fire, tornado or other covered loss. Therefore, even though you have insurance, you would have to pay some amount out of pocket. You may be underinsured if your coverage limits do not meet the following guidelines:
- Dwelling coverage—You should have a high enough limit to fully rebuild your home from the ground up in the event of a total loss. As such, consider insuring your home for its replacement cost, not its actual cash value.
- Other structures coverage—You should have a high enough limit to completely rebuild any structure on your property that is not attached to your home, such as a shed or fence.
- Personal property coverage—You should have a high enough limit to cover the replacement of all your personal belongings.
- Loss of use coverage—You should have a high enough limit to cover all your living expenses if you need to stay elsewhere temporarily while your home is being rebuilt or repaired after a covered incident.
- Personal liability coverage—You should have a high enough limit to cover all your financial assets if you are sued for damages.
Reasons You May Need to Increase Your Home Insurance Limits
The following are a few explanations as to why your limits may need to be increased:
- Inflation has affected home repairs. Home repairs have increased significantly in recent years, which means your initial limit may not be enough to cover the cost of labor and materials.
- You chose the bare minimum coverage limits. If you were trying to cut costs when purchasing your home, you might have opted for the minimum coverage to satisfy your mortgage lender’s requirements. If you’re in a better financial position now, you should consider updating your limits.
- You made home renovations. If you made significant home improvements, such as renovating your kitchen or adding on a deck, you may need to update your insurance policy to reflect these changes.
These are just a few reasons you may need to increase your home insurance limits. It’s critical to contact your insurance provider to ensure you have adequate coverage for your home.
Contact Wilcox Family Insurance to discuss your insurance needs. We can help ensure that your home has adequate coverage.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
Categories: Homeowners Insurance