Feb 23, 2021

Having The Right Home Insurance Coverage

Many people know little about their home insurance coverage until disaster strikes and then they learn the hard way that they may not have sufficient coverage to rebuild their home in the event of a fire or other disaster.  The best advice I have ever gotten related to home insurance came from a few questions from the insurance broker in reference to buying insurance for my parent's home.  He asked me if my parent's home was paid off.  The answer was Yes.  He then asked if my parent's had the savings to rebuild their home in the event of a total loss.  The answer to that question was No.  He then said that my parents needed the maximum coverage so that if their home burned to the ground, they would have full replacement value, which was just common sense.  

If you have a mortgage on your home, the mortgage company will require that they be named as a co-insured on your policy so that in the event of total destruction, they will get their loan repaid.  The three mistakes people make are 1. Not Having Enough Coverage.  2. Not Having the Right Coverage and 3. Not Having Coverage for Natural Disasters.  

Home insurance must be reviewed annually to make sure the coverage is sufficient to rebuild your home in the event of a total loss.  That means having an understanding of local building costs, which could change.   You will want to have replacement value insurance so that your home will be rebuilt if needed.  Insurance on your personal items like furniture is a separate rider to the policy.  If you live in areas that have floods, tornadoes, hurricanes and earthquakes, unless you have insurance coverage for natural disasters, which can be very expensive you may not have coverage at all if you don't purchase it.  You also need to be aware of deductibles that you may have to pay out of pocket before the insurance company will pay.  A flat dollar amount is better than a percentage of value. 

It makes sense every year to review your home insurance coverage with your insurance broker to make sure you have the coverage you need.  You certainly can shop your policy with various firms to get the lowest price and deductibles.  Most important, it is better to be safe than sorry.  Any kind of insurance only matters when it matters.  The last thing you want to experience are hassles to deal with rebuilding your home in the event of a total loss.