Every homeowner has insurance on his or her house, but what many fail to appreciate is that it is possible to be uninsured. In fact, being underinsured is common, and a homeowner may not find out about this problem until it is too late. The following are four ways you may be underinsured.
You're not insured enough for rebuilding costs
Many homeowners confuse the market value of their home with the rebuilding cost. This latter cost is what it will take to rebuild your home on the existing property. The cost of doing this directly relates to the labor cost as well as the building materials needed to construct a replacement. The problem is that the price of building materials has a tendency to rise more that the market value of a house over an extended period of time. If disaster strikes and you want to rebuild, you may not be financially able to do it. You need to review your current policy to determine exactly how much you will be compensated for your home. If this is less than the cost of rebuilding, then you are underinsured.
Your policy has not been updated to include home improvements
Often a homeowner will not think about updating their policy unless there has been a major improvement to the house such as a room addition. But smaller improvements count too, and you need to update your policy to include these improvements. Examples include such things as a pool, sauna or a remodeled patio with a built-in barbecue. If you need to rebuild your home, you will need money to rebuild improvements you have made to your home since you purchased it.
Your personal assets are not insured
Even if you have enough coverage to rebuild your home, you may not be covered for personal possessions. If a fire were to consume your home, you may find out the hard way that nothing in your home was insured; it was only the house. Unless your house is your only material possession, you need to have your personal assets covered. Without this coverage, you are underinsured, and you could lose a significant amount of your wealth in a disaster.
Not enough liability coverage
You may have had enough liability coverage for your home when you first purchased a policy, but like many Americans, you have accumulated more wealth over the years. You should look at how well you are protected in case someone claims to have been hurt on your property, especially in your house.
The first step you need to take is to take out your homeowners insurance policy and look at the amount of coverage you have. If you have any questions about the amount of coverage you need, you can discuss this with a homeowners insurance agent like The Selzer Company.Share