Home Insurance and Lack of Preparedness or Coverage

Insurance Journal published an interesting article based on the results of a survey undertaken by Trusted Choice and the Big I earlier this month. The results were very interesting and point out that most Americans are ill prepared financially for a major disaster, think their home policy will cover them in the event of a disaster, and may not have enough home insurance coverage to replace their home should they encounter such a disaster. With us being at the height of hurricane and wildfire seasons, let’s examine the survey’s findings.

Personal Savings: 28% of homeowners don’t have enough money in savings to support themselves or their family for one month if they had to leave their home after a disaster strikes, while only one third of homeowners can support their household for more than 3 months in this scenario.

Most home insurance policies do provide “loss of use” coverage which is used to rent living accommodations while your home is repaired or rebuilt. There is a limit in time, in most cases 12 months, and/or dollars, 10% to 20% of the home’s insured value. Flood insurance, on the other hand, does not provide for living expenses in the event of a flood claim. It does make sense to save for a rainy day if you live in a flood plain.

Flood Insurance: 73% of the responding homeowners do not have flood insurance. We only have to look at the recent flooding in Louisiana to see what happens when up to 31 inches of rain falls in 15 hours. Many of the affected homes were not located in a mandatory flood plain. Homeowners in low areas, adjacent to a creek, stream, lake or river, and near the Gulf coast should consider flood insurance.

Home Inventory: Less than one third of all respondents have an up to date home inventory stored away from their premises. Anyone with a smart phone can create a home inventory in 30 minutes or less. See this post for how to create one, https://wiseinsurancegroup.com/do-you-have-a-home-inventory/.

Home Insurance: Over 20% of survey respondents didn’t know whether they had a replacement cost or actual cash value home insurance policy. Only 58% have a replacement cost policy. In addition, 40% either don’t know or don’t have enough coverage to replace their home and personal property.

To find out whether you have a replacement cost or actual cash value policy, (see https://wiseinsurancegroup.com/home-insurance-two-broad-policy-types/ to learn more), check your policy declaration pages or call your agent. If your policy is actual cash value, find a replacement cost policy. You will pay a little more, but it will reap dividends if you have a major loss.

To determine if you have enough home insurance coverage, divide the amount of coverage on the home (Coverage A or dwelling value) by the square footage of your home and you’ll know what your home is insured for on a square foot basis. A loose rule of thumb for homes in Texas is $100 to $120 per square foot for starter homes, $121 to $150 for a nicer home and over $150 a square foot for custom homes. Luxury homes can easily require $200 to $300 a square foot depending on the level of finish out.

What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’m also happy to review your policies to confirm whether you have enough coverage, as long as you’re in Texas. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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