Is your home adequately insured?

In the event of a disaster, is your home properly insured? Know the right questions to get the right answers for insuring your home.

A good financial management plan involves insuring the aspects of your life that are of importance to you. According to Michigan State University Extension, the largest purchase most consumers will ever make in their life is the purchase of a home. Along with purchasing a home comes the need for homeowners insurance. Many homeowners purchase a policy they believe will cover the home and the cost of replacing their contents in the event of a disaster.

According to the Federal Citizen Information Center (FCIC), 66 percent of homeowners are underinsured by as much as 18 percent of the value of their home. This is equivalent to having a home worth $300,000 and in the event of a disaster only receiving $246,000 to replace the home and its contents. Many homeowners never review the coverage limits of their insurance policy until a disaster occurs. Are you one of these homeowners? In an effort to ensure that the best homeowners’ insurance policy has been purchased, the following questions are a great place to start:

  1. Does your policy’s replacement cost adequately reflect the actual cost of rebuilding your home? For example, if your insurance policy states that your replacement costs are insured for $100,000, but the actual cost of rebuilding your home would be $150,000, now is the time to increase the replacement costs coverage of your policy.
  2. Do you have a significant amount of jewelry, furs, artwork or firearms in the home? Have you itemized the things you own with your insurer to certify the cost of replacing them will be covered in the event of being stolen, misplaced or destroyed? Adding a simple, supplemental policy called a ‘rider’ to your insurance policy may cover the cost of your valuables. Itemizing your valuables under a rider policy can cost significantly less than just increasing the overall valuables policy under your homeowners insurance. For example, the cost to cover a $7,000 wedding ring under a rider policy equates to an additional $52 a year in insurance costs. However, increasing the valuables policy to $7,000 may result in a policy premium increase of up to $140 a year.
  3. Do you live in a flood or earthquake zone? In the event of a flood or earthquake, most traditional homeowners’ insurance policies do not cover damage from these events. If you live in a flood zone, contact the National Flood Insurance Program or visit for information on how you can obtain a policy. If you live in an earthquake zone, contact your current insurer for information on securing a policy.
  4. In the event of a sewer or drain back-up, do you have the adequate coverage to replace items that may be in your basement? If not, now is the perfect time to contact your insurer to determine if you need additional coverage for sewer or drain back-ups; sump-pump failures or water seepage.

These questions may not be comprehensive, but they may generate the conversation needed with your insurer to verify that your slice of the American Pie is adequately covered.

In addition, if you are wondering about your financial health, take a financial health survey from MI Money Health to get your financial health score! It is confidential and your answers never connect back to your name. This survey can help you evaluate your current financial situation, provide ideas on how you may improve your financial health, and connect you to resources in your local community.

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