Why Your Homeowners Insurance is Missing the Mark and How You Can Fix Them

Sep 16, 2020 | Personal Insurance

The worst things that can happen to a homeowner are paying a policy that they don’t need; having insurance but can’t cover what they really need. Oftentimes we think that just because we have insurance, it already means that we will be covered in case something happens. And it was already too late before we figured out that we are underinsured or even paying unnecessary policy.

Here are the reasons why your homeowners insurance is missing the mark and ways on how you can fix them: 

Not Having a Proper Understanding Of Your Own Insurance Covers – This happens all the time. The phrase “I thought this is covered“ sounds a cliché in an insurance company. Many have thought that this and that are already covered but assuming is a no-no to do especially with your insurance policy. Make sure that you understand every little detail about your home insurance. Know your home’s needs and be vigilant in making decisions before you even sign your home insurance policy.

You Bought Your Insurance With the Wrong Insurance Agent – When we say wrong, it means your insurance agent didn’t bother to determine your needs. The agent just signs you up without making sure that you have the right insurance policies. This scenario is no new. Some insurance agents just do the basics of their job which is to make their prospective buyers sign up without thinking thoroughly what they really need in their insurance. Also, be vigilant. Shop around. There are agents called “captive agents “ who are working for captive insurance companies. They have just limited policies and sell only one product since they are under one insurance company. As a result, the policies that they offer tend to be less customized for the needs of the clients. Therefore, make sure that you find an insurance agent who has not just the capabilities of explaining your insurance policies but also has concern for their clients. They must ask you what you want to be covered and properly explain everything. Having good communication with your agent is important for you to fully understand the coverage of your insurance. Don’t hesitate to ask questions. One good sign to spot a concern and professional insurance agent is when you see their willingness to know your needs. Those who pay attention to the details and explain everything you want and need to know to ensure that you are properly insured. 

Underinsuring Your House –  This is one of the main reasons why your homeowners insurance is missing the mark. Many think that it is okay to just insure their houses with the minimum or most standard policies just to save some money.  Little do they know that if in any case that they need to file a claim and they are underinsured;  that will be a total problem. Most homeowners buy only the insurance that can cover only their mortgage which is only around 80%-90% of the house’s value. Now the question is: How to know the right amount to insure your house?  Here are some tips:

  • It is advisable that you consult a professional home-replacement cost estimator. By this, you can be sure that they can give you the right estimated amount of your house. Some insurance companies give this service for free, especially to their high-value customers. However, it might cost you around $300 if it happens that the insurance company you are with is not giving it for free. 
  • You can make an estimation yourself. Yes, since DIY ( Do It Yourself) is not that hard to do now; why not try it? Patience and meticulousness is the key. There are web tools that you can check online to estimate replacement costs. Other websites will charge you around $8. It has questions that you need to answer. This questionnaire can be 20-30 minutes long or more depending on how many questions the website has. But if in any case that you are not willing to spend a buck and think that you can do it without the help of the web; well you yes you can actually just do it yourself. 
  • There are certain ways or things that you just need to do to get the estimated amount.
  • You can start by making a list of all the materials used to build your home. From the kind of cement, flooring,  walls, ceilings, and roof. Is your house a modern style or an antique kind.  Every detail is important. Take note if you hired an architect and engineer to build it. Also, if you hired a professional  interior designer to decorate your house. Second, go to each room and make a list of everything that might add to the value of your house. Your personal belongings are big factors that can contribute to your house’s value more than you think. Your paintings, jewelry, furs, and gun if you have one should be listed. There are special coverages that might be needed to add to your policy for expensive possessions. Make sure that you keep all the receipts of your purchases as well. Remembering the number of your personal belongings is good, but having the receipts to back it up is way better. Lastly, don’t forget to list down all the upgrades that were done in your house. This can add value to your property greatly so don’t underestimate any changes no matter how small or petty you think it is. Now once you have all the information needed. You can talk to your trusted insurance agent about what policy best fits your needs. 

Don’t Assume That Natural Disasters Are All Covered – Again, assuming things can never do us good. Especially assuming coverage in your homeowners insurance. A good example is flooding. This coverage is not included in a standard homeowners insurance policy. If you are living in a flood-prone area it is almost mandatory for every house to have flood policy added to their insurance. Houses near the river,  lake, and ocean are the most prone ones who need to acquire this policy. Also, areas that are prone to natural disasters that can cause floods like hurricanes, tornadoes, hail, and storms. If you remember what happened to the victims of Hurricane Katrina. They said that their insurance agents had told them that they didn’t really need to add flood insurance in their policy. While it is very obvious that they need it. Still, the court ruled that their insurance companies are not guilty and are not held liable to pay any damages caused by floods due to Hurricane Katrina. Being said, if you know in your heart that you need a specific policy, then you better have it. And if you want to be certain,  you can also consult and go to the National Food Insurance Program’s site. They are able to tell you if you need to have extra coverage for floods. If you need it, better ask your trusted insurance agent to add it on your policy. 

Having The Wrong Impression About Your Deductibles – We know that our deductibles is the amount of money that we need to pay when we make a claim before our insurance kicks in. However, most deductibles are not a flat rate. For example Your house was damaged by a hurricane. Your deductibles will often turn out to be a percentage of your coverage. Meaning, from 1% it can go up to 5% of the insured value for a flood. Same thing with the earthquake. Your deductibles can go as high as 10% – 15%. Being said, knowing how your deductibles really work is vital for you to be prepared in paying a certain amount in case you need to file a claim. Though there are options as well where you can ask for the same flat rate no matter the claim is. But this plan can be really expensive and finding an insurance company that offers may be hard.

Lack of Coverage – In general this is always the reason why you get underinsured. Whether you say you know it or not. Still, understanding every detail about your own homeowners insurance policy is your job. You might say that your insurance agent didn’t tell you this and that. However at the end of the day; it is your decision. So might as well educate yourself about every bit of your policy. And be smart in choosing your insurance agent. Knowing that you are working with someone you can trust is a good start to have a better outcome in deciding what you need in your insurance.

Here are the other things that you need to keep an eye on:

Replacement Cost is Better Than Actual Cost- If you have actual cost chosen on your policy; the insurance company will pay the current amount of your possessions. So let’s say, your five-year-old couch was totally damaged. You bought it for $1000 five years ago. But it’s current value depreciated to $500. Your insurance company will only pay you $500 for its actual cash value. Unlike if you have Replacement Cost coverage. The insurance company will pay you the amount of money that can buy the exact same couch that you have. 

Loss of Use Coverage- Though most homeowners insurance covers this, still you need to make sure that you will be covered enough until your house is rebuilt. Insurance companies will provide you money to pay for a temporary home where you can stay. Also, will pay for your basic expenses. But this coverage has limits. Hence,  making sure that you are fully covered is very important. Being covered for two years while rebuilding your house is the ideal time that you should get. Ask your insurance agent about this coverage to make sure you are fully covered.

For more questions or inquiries, do not hesitate to contact us and we’ll get back to you right away.