Is Your Home Underinsured? 61% Of Homes Are
The truth is that two out of three U.S. homes don’t have enough insurance coverage in case of disaster. Find out if yours is one of them.
When was the last time you checked whether the insurance on your home was adequate?
About 61 percent of U.S. homes are undervalued by an average of 18 percent, according to Marshall & Swift/Boeckh.1 That can add up to serious financial trouble for homeowners, so see if one of these scenarios rings true for you.
Improvements Can Boost Home Value
According to the Harvard University’s Joint Center for Housing Studies, spending on home improvement projects may increase 3.5 percent annually through 2015.2 But those major improvements do more than increase your comfort and pleasure—they can spike the cost to rebuild your home.
Potential problems: When home improvements aren’t reported to the insurance company, your home may be left undervalued and underinsured. In the event of a disaster such as a fire, there might not be enough money for the improvements to be covered.
How to fix it: Once a year, do a policy review with your insurance representative for MetLife Auto & Home®. He or she can calculate how much it would cost to rebuild your house then make sure your insurance policy covers you for 100 percent of that estimated amount.
Higher Construction Costs Aren’t Factored In
Even if your home was properly insured when you purchased your home from a builder, today’s higher costs of construction and changes in building codes could cause problems should you need to rebuild.
Potential problems: If you haven’t looked at your homeowners policy in awhile, you might discover the limits haven’t kept pace with current construction costs.
How to fix it: Ask for a total component rebuilding estimate that evaluates each aspect of your home’s construction. This includes a look at the quality of materials, such as flooring, cabinets, vanities and countertops, rather than merely applying known rates of inflation to your former insurance limits.
Remember that costs to replace an existing house generally exceed the amount needed for new construction. If for no other reason, the cost of removing the debris and demolition of any undamaged portion add to the costs. Plus, there may have been changes in building code requirements in your community since the time your home was built. You may need Ordinance or Law Coverage to pay for upgrades that were not part of your damaged house.
Older Homes Have Unique Characteristics
Older homes, especially if they are historic, present unique insurance challenges.
Potential problems: Older homes often feature better craftsmanship and higher-quality materials than those used in homes built today. Details such as high-grade wood floors or an elaborately detailed Victorian exterior can be much more expensive to replace than modern vinyl tile and siding.
How to fix it: Discuss unusual architectural details with MetLife Auto & Home and make sure there is enough insurance to cover their replacement.
Don’t forget your possessions when you update your homeowners policy. This convenient personal property inventory from MetLife Auto & Home can get you started.
1 Insurance to Value Index, Marshall & Swift/Boeckh, June 2012
2 Harvard University’s Joint Center for Housing Studies, March 2011 (http://www.bloomberg.com/news/2011-03-10/home-remodeling-to-rebound-in-u-s-as-owner-confidence-improves.html)