I’m all about protecting your money and your future, and there’s a critical issue right now that I need to talk to you about. It’s about the cost of homeowner’s insurance, and there’s something huge you may be overlooking — and you’re not going to like it.
The hard truth is, you may not have enough homeowners insurance.
Why Do You Even Have Homeowner’s Insurance?
When I ask people why they have a policy, the typical answer is, “Because my mortgage lender says I have to.” But that’s not a good enough reason!
You have homeowner’s insurance for one essential reason: If a catastrophe occurs like a fire, a major storm, a catastrophic loss, you simply cannot afford to rebuild your entire life with your own savings. That’s what insurance is for — to protect you against that massive, financially devastating risk.
The Problem: Rising Costs and Underinsurance
Here’s where I have to pour salt in the wound. We’ve all seen our homeowner’s insurance premiums skyrocket around the country. And at the exact same time, a huge percentage of us are underinsured.
Why? Because the cost of rebuilding homes (the labor, the materials) has gone up so much.
In the past, some insurers would just cover you for whatever the rebuild cost was. Not anymore. It is rare to find an insurer who will say, “Don’t worry, we’ve got you covered.” They only have you covered if you have adequately insured that home based on today’s rebuilding costs.
Time To Check Your Policy
I know this is terrible to say: You’re already paying this high premium, and now you have homework.
You need to peek at your policy. Most of us rarely do, but you must look at your written policy or check it online. See what you are covered for to rebuild your home.
If you know in your heart of hearts that this number isn’t even close to what it would actually cost to rebuild your home from scratch today, you have to act.
You must contact your company or agent to discuss increasing the coverage on that home.
A Strategy To Offset Increased Coverage
I know you’re worried about spending more money, but I have a strategy that should help:
- Increase your coverage: First, work with your agent to raise your dwelling coverage to an amount that accurately reflects the cost to rebuild in your area.
- Raise your deductible: At the same time, ask to increase your homeowner’s insurance deductible.
These two steps should essentially cancel out in terms of premium cost, or at least significantly mitigate the increase. We also have more tips to lower your home insurance premiums if you need more ways to save.
For Homeowners Without a Mortgage
If you’re among the 40% of people who own their home free and clear (a stat that hasn’t been this high in modern times!), you have full control. Raising your deductible means that if you have a claim, you’ll have to cough up the first several thousand dollars — the amount you choose to self-insure — but then you’ll have full insurance for the major, catastrophic costs.
For Homeowners With a Mortgage
If you’re among the 60% of homeowners with a mortgage, you still have an option. Your mortgage company’s contract specifies the maximum deductible you can have. You never want to raise your deductible above the limits your lender allows. However, it’s quite possible that your deductible is below what they permit. Raise it to the maximum amount allowed!
Yes, if you have a claim, you’ll have to come out of pocket more at the beginning. You might hate me for that in the moment. But you will have the peace of mind of knowing you’re fully insured for the full amount of a major claim.
Final Thoughts
It’s no fun to have to spend more money, but this is money well spent. Don’t be one of the millions who find out they’re dangerously underinsured when disaster strikes. Check your policy today!
