Your Insurance Guy
by Jim King
What you haven’t asked about your homeowners insurance coverage
(but you should)
Today, many homeowners are under insured. Put simply, you may not have enough coverage if you have a catastrophic loss like a fire.
As an example, if you are insured up to $400,000 and you have a fire and it costs you $500,000 to rebuild your home to the condition it was in, that $100,000 comes out of your pocket. That’s right, you could be out $100,000 if you don’t have the right level of coverage.
How did this come to be? Well with rising inflation and the supply chain shortages, the cost of building materials and labor have risen dramatically in the last two years. Those factors combined have driven the cost of rebuilding a house through the roof (if you will excuse the expression). The reality is that Homeowners insurance coverages have not always kept up with the costs of construction.
To begin to assess if you have the proper level of coverage, look at the section in your Homeowners insurance policy titled “Coverage A”. I used to use a rule of thumb that if you calculated the square footage of your house and multiply it by $200, your Coverage A amount (the amount up to which the insurance company will pay – the upper limit) should be approximately the same or at least within a reasonable range of our calculated number. I’m now advising our clients to multiply the square footage of their house by $300 to estimate the value they should see under Coverage A. If those numbers are not reasonably close you should call you insurance company or your insurance agent to ask them to increase your coverage.
Please feel free to call us with any questions or concerns about your insurance coverage. We are happy to help.
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