You may not think about water damage often, but it can have a serious financial impact on homeowners. In fact, water damage is the second leading cause of property damage in the United States. For this reason, it is essential to have proper insurance coverage. Although you may never use it, know how much protection is in your policy. And not just for flooding, but also against water damage and all of its causes. Below are three quick items every homeowner should check. Make sure you are adequately covered and not underinsured for water damage or weather-related loss.
WHAT DOES IT MEAN TO BE “UNDERINSURED FOR WATER DAMAGE”?
Homeowner’s insurance is one of the most important types of insurance to have. Why? Because it protects your home and belongings in the case of a covered event. A covered event can include theft, fire, or certain types of severe weather. Unfortunately, many Florida homeowners are underinsured for water damage. This means their policy would not cover the full cost of damage restoration, rebuilding, or replacing their home or furnishings. Additionally, some homeowners are not covered at all, depending on the source of water damage.
Underinsurance (or lack of the necessary policy rider) leaves the homeowner at risk of paying out-of-pocket. This insurance gap could include some or all of the repairs or replacements. If you want to avoid being underinsured, there are a few steps you should take. First, insure your home for its total rebuild cost and your belongings and home furnishings for their total replacement value. By doing this, you ensure you’re fully protected in the event of a covered loss.
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HOW CAN BEING UNDERINSURED CAN AFFECT PARTIAL CLAIMS?
Many homeowners are underinsured for water damage without realizing it, which can have a major impact on partial claims. Most insurance policies contain an “average clause” or “condition of average”. This means that if you are underinsured, the insurer will only pay out a proportionate amount of your claim. For example, if your home is underinsured by 50%, then you will only receive 50% of any partial claim. This can leave homeowners with significant out-of-pocket expenses following a loss. Want to avoid this? Simply make sure you have an accurate assessment of the value of your home and its contents. This confirms your household is adequately covered.
WHY DOES BEING UNDERINSURED SEEM MORE COMMON NOW?
For most of the country, home prices have seen a steep increase over the last 2 years, in part, due to the exponential increase in the cost of building materials. However, if your homeowner’s insurance policy was written before this market shift, your insured value may be significantly below the current market value. Generally speaking, as the cost of living increases, the risk of underinsurance of homes also increases.
3 COMMON REASONS A HOME IS UNDERINSURED FOR WATER DAMAGE
1) You Purchased the Minimum Level of Coverage:
When signing your original policy, you may have gone with the minimum recommended coverage to save a little bit of money. And though the minimum coverage will still provide you with some protection, more often than not, it’s not as much as you really need. For example, if your home is damaged in a natural disaster and you only have the minimum amount of coverage, your insurance company will only pay out a fraction of what it will cost to rebuild or replace your home.
Generally, get enough coverage to rebuild or replace your home to at least 100% of its worth, if not more. If you keep your coverage high and get any recommended add-ons to your policy, you are protected from any surprises that come your way. Additionally, if you ever need to file a claim, you can rest assured knowing that you’ll have the coverage you need to get back on your feet.
2) Inaccurate Valuation: Home Inventory
Conducting a home inventory might sound like a no-brainer, but in reality, a lot of homeowners skip it when buying a policy because it’s too much work. This can lead to some pretty severe gaps in your policy. If you don’t know how much your items are actually worth, how will you know how much coverage to get? Make the home inventory process easier by using a home inventory app to document all your tech, furniture, and decor so you can easily let your provider know what needs replacing in the event of a disaster.
3. You Don’t Have Recommended Policy Riders
Even if you have replacement coverage, there are still ways you can be underinsured. This includes gaps in coverage for expensive belongings or protection from natural disasters. Traditional home insurance policies may not cover these things automatically. If you don’t have insurance riders, you might be out of luck when it comes to financial assistance from your provider.
Insurance riders such as scheduled personal property and equipment breakdown coverage will provide additional protection for specific items, but for natural disasters, you can add riders such as flood insurance or hazard insurance. Finally, consider adding umbrella insurance for more protection if you want all-encompassing coverage. By adding these riders to your policy, you can ensure that you and your belongings are covered in the event of an accident or disaster.
WHAT SHOULD I DO TO PREVENT BEING UNDERINSURED FOR WATER DAMAGE?
Homeowners insurance is an important part of being a responsible homeowner. Make sure you are fully protected! Check your policy’s coverage and add any recommended riders. Being underinsured for water damage in Florida can be costly, so make sure to protect yourself and your home today!