Many Homeowners Underinsured When it Comes to Their Home
According to a recent survey conducted by Zogby International almost one third of Americans don’t know how much their homes are insured for, and nearly half don’t know how much coverage they have for their homes’ contents, such as furniture and clothing.
The survey revealed many other common misconceptions that homeowners had regarding insurance:
* Nearly a third of homeowners believe their insurance coverage is based on the current market value of their home. However, homeowners insurance is based on the cost to rebuild the home, a mistake that could lead to confusion for homeowners trying to evaluate whether they have the right amount of insurance.
* Two thirds of those surveyed believe insurance pays for the full cost to rebuild their property in the event of a major loss, such as a fire. In reality, nearly all insurance companies “cap” the amount paid to rebuild the dwelling following a total loss, unless additional coverage is purchased. Furthermore, the coverage is subject to a deductible, and certain causes of loss, such as water damage caused by the natural disasters of flooding, are excluded completely.
* Three-quarters of respondents believe insurance will pay the full cost to replace personal belongings in the event of a loss. However, depreciation is usually factored in, unless optional replacement coverage is selected.
* Sixty percent believe insurance will pay for the full cost of replacing valuables, such as jewelry and collectibles. Most insurance policies contain a payment cap for replacing valuables, although additional coverage can easily be purchased, and the coverage is subject to a deductible.
Homeowners should be sure to review their insurance policies to ensure they are properly covered.
