With frequent flooding incidents across the country and forest fires plaguing the west, we’ve probably all heard devastating stories of families who have lost everything. Every stitch of clothing, every stick of furniture, every baby picture. Every. Single. Thing.
Starting over would be difficult enough, but sometimes the scenario becomes even more bleak. We hear that they didn’t have a Homeowners Insurance policy. Or that they had allowed it to lapse. Or that, for some reason, it failed to cover their losses.
As much as we might sympathize and even offer to help someone in that situation, not one of us wants to end up in it ourselves. While we might not be able to avoid natural disasters or other forms of devastation, we can lessen the impact of such a tragedy by making sure we avoid common Homeowners Insurance mistakes.
The first and most common one is underinsuring your home. Most homeowners fail to purchase enough insurance to allow their home to be rebuilt, if need be. According to a 2009 study, this error is made by approximately 67% of US homeowners.
Why does this happen? Many homeowners only purchase enough insurance to cover their outstanding mortgages. Depending on the home’s appreciation, the mortgage amount often represents less than the actual value of the house.
Another reason many homeowners underinsure their homes is that instead of considering rebuilding costs, they simply insure a home at its current resale value. Depending on location and the current market, the cost of rebuilding a house — especially in the wake of a local storm or other disaster — can be a lot more than its estimated value.
You need to calculate labor and supplies that would be needed in order to have it rebuilt and base the insurance off of that. You could ask your insurance agent to help you calculate rebuilding costs, but many would also recommend contacting a professional home-replacement cost estimator.
As an alternative, you could contact a local builder or real-estate agent and ask about the average rebuilding costs in your area. In addition to the average estimated amount, you’ll want to add in any special features in your home. Add to that any valuables — art, antiques, electronics, jewelry, etc. (You may also need added policies or riders for certain items.)
Once you’ve added in all the costs, you’ll want to compare your estimate to your current coverage amount. If your current policy falls short, you’ll want to have it increased. Then make sure it remains current, year after year.
Instead of making new calculations each year, you can ask your insurance agent about an automatic inflation provision, extended replacement coverage, or guaranteed replacement cost coverage. While each of those will increase your monthly premiums, they will also offer you the peace of mind that comes with knowing you do have enough coverage.
The Nicholas Insurance Agency, led by Greg Nicholas, is a family owned business serving the York county, Pennsylvania region. Offering exclusively Allstate insurance products, the Nicholas Agency provides auto, homeowners, rental and landlord insurance as well as life & disability, recreational vehicle, motorcycle and personal liability insurance.
For more information, visit our two York, PA locations at Westgate Plaza or York Marketplace or call us at (717) 764-2024.