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How to Know if Your Home is Properly Insured

hands-1176674_960_720We all pay insurance premiums on a regular basis to protect ourselves but it’s usually hard to imagine needing to use that insurance for a real disaster. If you’re like me, I’ve used my homeowner’s insurance to repair my roof and gutters, but a whole house replacement or an injury lawsuit is far from my mind on a daily basis! But will your assets be fully protected in the case of the unthinkable? Here is how to be sure that your home is properly insured no matter what:

– Know what your policy covers. The typical homeowners policy covers the cost to repair or rebuild from the result of a fire, hurricane, hail or lightning. Most do not cover damage from floods, earthquakes or routine wear and tear.

– Be sure you have enough to rebuild. You’ll rarely reach anywhere near your limits from small damage claims, but do you have enough coverage in case you need to build from the ground up and replace all of your possessions? Insurance companies generally reach a figure of the cost to rebuild and refurnish based on their algorithms using your square footage and address, but oftentimes that information alone doesn’t provide an accurate quote. If you’re unsure if you have enough coverage, contact a local contractor to give you a quote on the cost to rebuild your existing home.

– Add some buffer. Since building materials and contractor’s costs can vary from time to time, it’s important to be sure that you’ll have MORE than enough coverage no matter what. To ensure this, your policy should include a guaranteed replacement clause, which generally provides 25% more coverage over the value of the cost to replace the home.

– Do a home inventory to cover your home’s contents. Many people way underestimate the cost to replace their belongings. Again, insurance companies use algorithms to estimate the cost to replace possessions (usually 50-70% of the cost of the structure of the home), but this may be much less than the ACTUAL cost to replace items, especially if your home is full of antiques or other specialty items. Take a home inventory and determine the value of your more expensive items to serve as a starting point for figuring out how much coverage you really need.

– Purchase extra coverage for very expensive items. Generally, homeowners insurance has a limit of around $1500 per item to replace so if you have items that are more expensive than this, you will need additional per item coverage.

– Don’t forget the liability coverage. Liability insurance covers you against lawsuits for bodily injury or property damage that you or your family cause – at your house or elsewhere – and includes the costs to defend you in court should it reach that level. Most policies include at least $100,000 in standard coverage, but if you have significant assets you may need to increase your coverage or look into buying an additional umbrella policy.

No matter your current coverage, it’s always best to review your insurance once a year to make any changes necessary to ensure that you are always full protected!

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