Home insurance is necessary; do you have enough?

How to make sure you have enough homeowners insurance

Home ownership is expensive enough without having to worry about replacing a house. But sometimes you have to do that if a disaster or fire strikes. For that, you want insurance, so that you don’t have to pay the replacement cost of the house yourself. And if you have a mortgage, your lender will insist that you have homeowners insurance. But do you have enough? Are you covered for all of the things that are likely to go wrong?

Many people who live along the Gulf Coast and suffered damage to their homes from Hurricane Katrina were surprised to discover that their property damage wasn’t covered by their homeowners insurance. That’s because flood damage isn’t covered by most policies; you need flood insurance for that.

Below are some things that you should probably think about when buying homeowners insurance:

• Flood insurance - Completely separate from your standard homeowners policy, flood insurance is an extra policy that is independent of all others. In areas of the country that are flood prone, the Federal government assists with these policies; elsewhere, you can buy it through your regular insurance company. Don’t think you don’t need it just because you live on a mountaintop or some other place that won’t “flood.” Damage to your property from a broken sewer line or pipe is also flood damage.  You are much more likely to see damage to your property from water than you are from fire, so think about it.

• Earthquake coverage - Earthquakes, like floods, are not covered by most insurance policies. People think of the Bay Area or Los Angeles when they think about earthquake damage, but there are many other parts of the country where seismic activity occurs. The biggest earthquake ever recorded in the US happened near St. Louis. In most areas that don’t have a lot of activity, the coverage for earthquakes is fairly inexpensive. You should think about it if there is any seismic activity in your area.
• Replacement cost - Most policies allow for depreciation; you want to make sure that your policy covers replacement cost. That way, should something be damaged, you can be assured that it will be replaced. Otherwise, you’ll just get a check for a portion of the value, and you’ll have to pay the rest out of pocket.
• Enough coverage - Do you have enough coverage? Property values are up all over the country and construction costs are up as well. You want to make sure, should disaster occur, that you have enough coverage to fix whatever is wrong.  Studies show that nearly two out of three homes are insured for less than their full value. Some policies can adjust for inflation; that’s something you might want to discuss with your insurance agent.

No one likes to pay for insurance; it’s one of those things that you pay for and rarely get anything tangible from. But failure to have it, or have enough of it, can be a serious problem in case of fire, flood or natural disaster. It’s important to have coverage, and to have enough of it and have the right amount of it. If you aren’t sure, call your insurance company.