Signs Your Home is Underinsured, And How To Fix It

Most people do not know that their homes are underinsured until it is too late. There’s nothing more painful than expecting than expecting some respite from your insurance company after a disaster –whether manmade or natural – only to be told that your coverage was inadequate or lacking. There is no clearer sign of being underinsured than that.

The mere thought of knowing that it can happen is enough to give one a headache. According to MSB, an insurance services firm, about 65% of all homeowners are underinsured by about 18%. This means that if your house were worth $400,000 before an incident, your compensation would be about $328,000 after deducting the 18%. This is a frightening statistic.

Unfortunately, most insurance companies and agents do not seem to be of any help either. For instance, the victims of Hurricane Katrina were frequently told by their agents that they did not need flood insurance. The same thing happened to victims of San Diego, who lose their homes in 2003.

Moreover, sometimes, the situation is not helped by the homeowners themselves who assume that their insurance payouts will be in tandem with inflation rates and any renovations they may have carried out without informing the insurance company.

This is why you need to be proactive when it comes to your home insurance coverage. You need to know that your insurance will cover any damages caused by flooding, fire, hurricanes or any other natural disaster. Over-insuring however is not the solution seeing as that is tantamount to throwing money away every year. You need to find the “sweet spot” where your insurance premiums are just right, and the best way to do that is to follow these tips:

Be Extremely Clear On What Your Policy Covers

You’d think most homeowners would take this very seriously. However, this is not always the case. If you are looking to pay the right amount and never have to worry about being underinsured, you need to understand the nitty-gritty of your insurance coverage. Find out about associated liability coverage and other extras that you need.

Mainly, you want to be sure that your insurance plan covers every possible scenario or problem. Before choosing your particular policy, contact the agent and speak with them regarding other possible policies and plans. Ask for in-depth information and knowledge, and then crosscheck with other agents and the internet. Be open about your situation at home.

If, for instance, you have hardwood floors, it would be in your best interest to mention it to the agent and see if there’s any individual coverage you need to be on. This is important because hardwood floors are more expensive that traditional flooring materials.

Review Your Coverage Benefits at least Once a Year

We know that is can be tedious to do such, but it probably won’t take up to an hour of your time. Compared to how much you could lose, we think this is worth it. Every year, go over your coverage plans with your agents. If you have done any new renovations, be sure to update them about it. It is not showing off; it is simply covering your bases so you do not suffer the consequences later on.

Avoid Being Cheap

It is interesting how people want to pay less and then get the full benefits of their insurance plans when there is an incident. Being cheap will only get you so far. You also need to get disaster and flooding coverage if you live in high-risk areas that are prone to natural disasters such as flooding, hurricanes, wild fires, tornadoes and storms.

Also, check for “loss of use” under your coverage. By default, your insurance company should pay your rent for up to two years while your new home is being built. If they will not be covering up to that, then you know that you are underinsured and either need to increase the limits or sign up with another insurance agent.

Oscar King is a former insurance adjuster living in Orlando who left the industry due to shady practices, and now shares his insight with friends and family. He also realizes that sometimes, insurance company practices are not just shady, but illegal, and for cases where that line is crossed he highly recommends the services of David R. Heil, PA . You can learn more about Oscar by visiting on Google+.