Understanding Home Insurance 2017-01-31T11:45:38+00:00

Is your home underinsured?

Consider your house for a moment. It’s probably the biggest financial investment you’ll ever make. And if you’re like most of us, it’s not even close to being paid for. Having it damaged or destroyed would be disastrous.

Almost 2/3 of homeowners are underinsured

Look at your neighbor to the left and your neighbor to the right. Two of the three of you are likely to be underinsured by 20%. That translates to self-insuring $20k for every $100k of your home’s value.

2013 saw a staggering $22B in natural disaster-related losses. Over 40% of those losses weren’t insured. How would your insurance respond if your home was completely destroyed by a storm or a fire? Would you be able to replace it? The risk of underinsuring a property applies to smaller losses, too, as an “insurance to value” formula is used when determining how much of a claimed loss is eligible for settlement. According to a survey from Marshall Swift Boeckh, a leading insurance industry resource, almost two out of three homeowners are underinsured.

Many other homeowners are actually over-inured!

From an insurance policy perspective, it doesn’t really matter how much a home is worth. Instead, the critical value is how much it would cost to replace the dwelling in the event of a devastating, catastrophic loss. According to Dan Frankel, a principal at Ellis Insurance, predicting the replacement cost requires more than a ballpark guess and an online calculator. Determining this value is as much art as it is science, a process that begins with the homeowner’s input.

Common causes of too little (or too much) insurance

These are the common causes leading to inaccurate property coverage selections:

  • Construction costs have increased
  • Materials costs are volatile
  • Renovations and additions go unreported
  • The initial replacement estimate was based on market, not replacement value
  • Coverage hasn’t been reviewed recently

How to protect yourself, your home, and your family

We feel honest, educated answers are the best way to earn your business.  Contact us today for a review of your homeowner’s insurance, a quotation, or an Insurance Tune-up(SM) on your existing insurance.