Make sure you aren't underinsured
Homeownership is part of the American Dream, and for many people a home is their largest single purchase and most valued asset. Unfortunately, many homeowners don't realize that their possessions and homes would be in jeopardy if they were inadequately insured and lost due to fire, flood or another disaster. So it's important that you ask yourself one simple question: Do I have enough insurance to repair or replace my home if it is damaged or destroyed?
Most homeowners would say yes, but recent studies indicate that many homeowners lack sufficient insurance to rebuild after a disaster. In fact, according to Marshall & Swift/Boeckh, which provides building-cost information to insurers and government agencies, 61 percent of all homes are underinsured by an average of 18 percent.
As one of the nation's leading insurance providers, Mercury conducts an annual review of its customers' homeowners coverage limits based upon estimated replacement costs in their neighborhoods, and as a result of these calculations may adjust the policy limit. These estimates are tied to general factors in each area and are supplied by appraisal agencies.
This is only part of the process, however, as we recommend that you also get an insurance checkup from your agent once a year to help you make an informed decision about the coverage you need. No one wants to pay a higher premium, but construction costs have increased dramatically over the past several years and it's important for you to make sure that any potential loss has satisfactory coverage.
This is especially important if you have made improvements to your home and have not incorporated these improvements into your coverage. And even if you haven't made any improvements to your home, we still recommend a review to make sure that your coverage limits are adequate to cover the cost of rebuilding in your area, because every neighborhood can be a little different.
The National Association of Homebuilders annually tracks building costs, and the average price per square foot for residential construction in the Western states jumped 36 percent between 2002 and 2007.
So take a moment to reassess your coverage and protect your family's future. To help you get started, here are a few things you should consider and discuss with your agent:
- When was the last time you evaluated the amount of coverage on your home? If it's been more than a year then it's time to talk to your agent about your coverage.
- Do you have extended replacement coverage? Mercury offers home insurance with additional coverage of up to 150 percent of your home's policy limit. After a disaster, without extended coverage, you may not have enough coverage to rebuild or repair your home and replace its contents, so this benefit can really help if you suffer a loss.
- Have you made any improvements to your home? If so, then you should make sure that you have enough coverage to replace these new features.
- Get your house appraised. If it's been several years since it was last appraised then it may be time to get an independent appraisal from a licensed professional. This will help to better establish the amount of coverage you need, but remember to have the appraiser calculate the cost to rebuild your home with similar quality features in today's market, which may be different than the actual value of your home.
- Keep a detailed record of your home's contents and unique features. Photos and video recordings of designer kitchens, big screen TVs, and other special features will greatly speed the claims process in the event of a loss.
- Carefully read all of your policy and coverage documents. Your agent is always willing to help answer any questions you may have, or help you find a professional who can answer your questions.
You ultimately know your home better than anyone else, so you will need to decide what's right for you. Your Mercury agent will be happy to assist you in evaluating your current policy limits and coverages to help you make sure that you have the right coverage.