Do you have the proper amount and type of insurance coverage? Being under insured is a common problem, particularly with homeowners insurance. Inflation and home improvements can increase the amount it will cost to rebuild your home if you have a total loss.
Insurance is an incredibly valuable tool and can help you maintain your financial security no matter what the future holds. But whether it's homeowners insurance or car insurance, it's important to remember that your insurance can only protect you if you have adequate coverage.
Many people mistakenly think they are protected because they have insurance, but not having proper coverage, or being under insured is just slightly less devastating than not having insurance at all.
On the other hand, having too much insurance can cost you more than you really need to spend. You want to find that "sweet spot" where you have just the right amount of coverage without paying for more insurance than you need.
So, how do you go about finding that sweet spot in your insurance coverage? How do you ensure that you have enough insurance without overpaying for more than you need? There are several things you need to take into consideration when you are deciding how much, and what, coverage you need.
The first thing that you need to keep in mind is that homeowners insurance policies don't cover floods, earthquakes, war or a nuclear accident. If you live in a earthquake prone area, for example, you may want to buy separate earthquake insurance.
When deciding just what types of coverage to buy, it's worth it to buy guaranteed replacement coverage. That means that your home will be rebuilt at today's cost even if it's more than the original policy limits you bought. This is a good thing to have because your home will almost certainly cost more money to rebuild than it originally cost when you first purchased it and insured it.
If you have a detached garage or shed, make sure that your insurance covers outbuildings. In addition, most insurance policies will cover the contents of your home but only up to 75% of the value of those contents. Do a detailed inventory of the contents of your home and estimate how much it would take to replace everything, then calculate how much 75% of that amount would actually cover.
To overcome this difference you can get replacement cost coverage for your contents which means they will be replaced at today's cost (so you can buy new) instead of the typical amount which is calculated based on the depreciation of your belongings.
Replacement cost coverage may cost a little more but having replacement cost coverage can mean the difference between replacing everything you lost versus not being able to replace everything you lost. When choosing your deductible remember that the higher the deductible, the cheaper your premiums.
Some additional coverage to consider adding are riders for jewelry or other expensive collectibles, an umbrella policy to protect you from liability above and beyond what your regular policy covers and displacement coverage that will pay for a place for you to stay while your home is being rebuilt or repaired.
These simple tips can help you find the proper coverage to protect your home and belongings. To get even more information, and a more detailed plan, consult a qualified insurance agent in your area.