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What Happens If Your Home Is Underinsured?

Outside structure To put it simply, if you are underinsured and you suffer damages for which you have to make a claim, the amount of money you receive will not be sufficient to cover the damages. In other words, if your home would cost $250,000 to re-build, but you insured it for only $150,000, you will only get $150,000 if your home is destroyed from a covered loss.

Structural damage When thinking of damages, it’s not always an entire house that gets destroyed. Wind may blow away part of a roof, lightning might strike a tree and fall on the patio, or a stone may shatter a window. While a damaged window might only be a few hundred dollars to replace, a damaged roof could cost you thousands.

Value Another mistake you might make is underestimating the cost to rebuild your home. You may have bought your house 20 years ago for $150,000 and it may have doubled-or even tripled in market value. However, it’s not the market value you should be thinking about. When insuring your home, you have to determine how much it would cost to rebuild your house today. The market value of your house may be $300,000 but it may only cost $200,000 to re-build in today’s market.

Contents As a homeowner, you should not only get sufficient insurance for the outside structure of your home, but the contents need to be insured as well. Whether it is furniture, paintings, electrical appliances, clothing or jewelry, you need to insure your belongings. Suffering a loss through fire, water, wind, lightning or theft is bad enough, but not being able to replace your valuables is even worse.Valuables Did you include your valuables? If you are a collector or have paintings or jewelry, you might want to insure those too. Before you do, it might be worthwhile to take a trip to an appraiser to learn the proper worth of your valuables. Taking a picture of jewelry is often a good idea. Jewelry, when lost or stolen, is rather hard to describe to an insurance company. Being able to show a picture will make a claim much easier.Additions A prime example of additional insurance is if you have a basement. Most basements have a pit for a sump pump (if not, you should). The American Society of Home Inspectors, based in Des Plaines, IL, estimates 60 percent of U.S. homes have wet basements, and 38 percent run the risk of basement mold. The water most often comes from rainfall and melting snow. To add coverage for a failed sump will be pennies on the dollar compared to the thousands of dollars a flooded basement could cause. This does not include the possibility of mold that can and will happen if a wet basement is not remedied.

Did you insure everything? When buying homeowners insurance it is important that you look at your home objectively and buy insurance appropriately. If you are unsure, get the advice of an expert. You might overlook the value of certain items. Things such as flooring, cookware, curtains and linens are often forgotten.

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