When it’s an investment as big as your home, it pays to protect it.
Key Points The average home is 22% underinsured. Minimum homeowner insurance doesn’t help much if it’s not enough to replace your home and property. It is 100% up to you to determine if your current homeowner’s insurance is adequate.
Your home mortgage represents one of the most significant debts of all. The same is true of every other homeowner you know. Isn’t it wild to hear that 2 out of 3 homes in the US are underinsured? According to Nationwide Insurance, the average amount a home is underinsured is 22%. However, some are underinsured by 60% or more.
What does it mean to be underinsured?
Your home is underinsured if you don’t have enough insurance coverage to rebuild it if it’s completely destroyed. And if you’re thinking, “I’m confident my insurance company will let me know if I’m underinsured,” you might want to think again. While some agents regularly conduct policy reviews with their customers, most do not.
If you have a loan for your property, your mortgage lender will likely require you to take out home insurance. After all, it wants to protect its investment. However, it’s possible that your lender will only require you to take enough with you to pay off your loan if it is destroyed. Let’s say you owe $175,000 on your mortgage and have $200,000 of coverage. That’s great; You can pay your mortgage if a hazard destroys the property. However, there is another problem in the game.
What if rapidly escalating construction costs mean it will cost $400,000 to make the house livable? Rising construction costs are one of the reasons so many Americans are underinsured. Simply put, our insurance policies sometimes don’t keep up.
They want policies that can keep up. If your insurer tells you not to worry because your policy has inflation protection built in, don’t let them drop the subject. While built-in inflation monitors are great when inflation rates are stable, this year has shown us how atypical rates can become.
Read more: Learn about full replacement coverage.
Discover: Save on your home insurance with one of these companies
More: Check out our top picks for homeowners insurance companies
Have you updated your insurer?
Hannoveraner Versicherungsgruppe hired The Harris Poll to research home renovations. The Harris survey found that a third of consumers are unaware that they need to tell their insurance company if they are renovating.
Leaving your insurance company out in the cold when it comes to renovations can easily leave you uninsured if something catastrophic happens.
Check your liability insurance
You are underinsured if you don’t have enough liability insurance to cover anything that might happen in and around your home. Suppose you added a pool or trampoline and a few months later a visitor gets injured. If you fail to tell your insurer that you have made these supplements, they will not be obliged to cover any liability claims you suffer. This also includes being sued by the injured party.
If you have adopted a dog, tell your insurer. While some insurers don’t discriminate based on breed, a growing number of home insurers are now excluding dog breeds that are considered dangerous. Ideally, you call your insurer and ask before you bring a new puppy home.
Here is a list of dog breeds that are typically excluded from home insurance:
AkitasAlaskan MalamutesAll Wolf BreedsChow ChowsDoberman PinschersGerman ShepherdsGreat DanesPitbullsPresa CanariosRottweilersSiberian HuskiesStaffordshire Terriers
As of 2023, five states have banned the practice of denying insurance based on your dog’s breed. They are:
IllinoisMichiganNevadaNew YorkPennsylvaniaPersonal Property Coverage
Personal property insurance protects the contents of your home if they are damaged or destroyed. Typically, coverage limits are set as a percentage of home coverage. Let’s say your personal property insurance is 50% and your home insurance is $400,000. If your home burns down and everything is lost, the insurance company will pay up to $200,000 to replace personal belongings.
And remember, if you’ve purchased or received anything of value, you’ll need to add an addendum or addendum to your policy to protect it.
Taking drivers into account
Make sure you’re well insured by thinking about what perils are likely to drain your bank account. For example, do you have insurance coverage that covers back up sewage and sump pump? Both problems could cost you thousands of dollars.
What about wind and hail protection? In some states, damage from wind and hail is covered by a standard policy. In others it is not. Make sure you know if you’re carrying the cover. If not, it’s worth asking for a quote.
While you’re at it, check out tabs covering energy surges, floods and earthquakes, and potential losses to a home business from hazards.
If you really want to rest easy tonight, ask for full replacement insurance for your home and personal belongings. This way you are guaranteed to be restored if your property is damaged, destroyed or stolen.
Our tips for the best household insurance
There are many home insurance policies to choose from. We’ve researched dozens of options and have shortlisted our favorites here. Looking for a Green Build discount or easy bundling policies? Do you want a user-friendly interface? Read our free expert review and request a quote today.