Homeowners insurance provides a crucial layer of protection. However, homeowners insurance becomes much less useful if you are over-insured or under-insured.
If you are over-insured, then your premiums are too high. You’re paying too much for homeowners insurance every month. You’re paying for coverage you don’t need. It’s unlikely you’ll ever make a claim that takes full advantage of all policy coverages and limits.
If you are under-insured, then you have too little insurance for your needs. You might have a $500,000 house and only $100,000 of insurance, for example. If you need to make a major claim, then your insurance could quickly be maxed out, leaving you paying hundreds of thousands of dollars out of pocket.
Are you under-insured or over-insured? Consider the following.
Consider Construction Costs in Your Area: Construction costs vary widely between regions. Consider contacting home builders in your area to ask about average square-foot construction costs. If the going rate in your area is $200 per square foot, and your home is 2,000 square feet, then you’d want $400,000 of homeowners insurance coverage. This gives you an idea of the replacement cost of your home, which is the amount of money you need to rebuild your home after a total loss.
Consider Liability Coverage Limits: Homeowners insurance isn’t just about property damage; it’s also about liability damage. Homeowners insurance policies have liability limits. If someone injures themselves in your home, then you could be liable for their medical bills and lost wages. The average homeowners insurance claim for bodily injury damages is between $10,000 and $20,000. Make sure you have sufficient liability coverage to protect your assets.
Add or Remove Coverage: If you live on top of a mountain in the middle of the country, you probably don’t need flood insurance or hurricane insurance. Check your policy to ensure you’re paying for things you will actually use.
Revisit Insurance Needs Regularly: Your homeowners insurance policy needs change regularly. Homeowners insurance covers your possessions and property. The value of your property changes every time you make a renovation. It also changes over time due to depreciation and wear and tear. You might add new possessions that impact coverage. Revisit your homeowners insurance regularly to avoid being over-insured or under-insured.
By following the strategies above, you can avoid being over-insured or under-insured.
If you are over-insured, then your premiums are too high. You’re paying too much for homeowners insurance every month. You’re paying for coverage you don’t need. It’s unlikely you’ll ever make a claim that takes full advantage of all policy coverages and limits.
If you are under-insured, then you have too little insurance for your needs. You might have a $500,000 house and only $100,000 of insurance, for example. If you need to make a major claim, then your insurance could quickly be maxed out, leaving you paying hundreds of thousands of dollars out of pocket.
Are you under-insured or over-insured? Consider the following.
Consider Construction Costs in Your Area: Construction costs vary widely between regions. Consider contacting home builders in your area to ask about average square-foot construction costs. If the going rate in your area is $200 per square foot, and your home is 2,000 square feet, then you’d want $400,000 of homeowners insurance coverage. This gives you an idea of the replacement cost of your home, which is the amount of money you need to rebuild your home after a total loss.
Consider Liability Coverage Limits: Homeowners insurance isn’t just about property damage; it’s also about liability damage. Homeowners insurance policies have liability limits. If someone injures themselves in your home, then you could be liable for their medical bills and lost wages. The average homeowners insurance claim for bodily injury damages is between $10,000 and $20,000. Make sure you have sufficient liability coverage to protect your assets.
Add or Remove Coverage: If you live on top of a mountain in the middle of the country, you probably don’t need flood insurance or hurricane insurance. Check your policy to ensure you’re paying for things you will actually use.
Revisit Insurance Needs Regularly: Your homeowners insurance policy needs change regularly. Homeowners insurance covers your possessions and property. The value of your property changes every time you make a renovation. It also changes over time due to depreciation and wear and tear. You might add new possessions that impact coverage. Revisit your homeowners insurance regularly to avoid being over-insured or under-insured.
By following the strategies above, you can avoid being over-insured or under-insured.
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