3 Common Home Insurance Gaps You Should Fill

Homeowners insurance can be a lifesaver if you have the unfortunate luck of being in the way of a tornado, flood, hurricane or your house burns down. In order to make sure you are fully protected it may be necessary to fill in a few gaps in your homeowners protection.

Here are three gaps you should be aware of and how you can ensure that you are fully protected should the worst happen.

The Replacement Value of Your Home

In the event that your home is completely destroyed due to a natural disaster or fire you homeowners policy will pay out to replace it, up to the policy limits. If your limits come in less than the cost to rebuild you will be on the hook for the additional costs. This can be a significant expense so it is best to make sure you are properly covered from the beginning.

Your insurer will estimate the cost to rebuild your home and write the policy for that amount. Unfortunately, these estimates are not always accurate and if they are off, you will be the one out of luck. It is possible to double-check their estimate online. Our home insurance calculator helps you calculate your dwelling coverage so you have the right replacement cost coverage for your homeowners insurance policy.

In addition, you should make sure that your policy has an inflation guard clause, which will adjust your coverage on a yearly basis to make sure your insurance keeps up with the cost of rebuilding your home. Adding extended replacement cost coverage to your policy, at 20 to 25 percent above replacement cost will make sure that you have enough coverage to rebuild your house. This additional coverage is very affordable, costing roughly $50 a year.

As always, if you make improvements or additions to your home you should immediately notify your insurer of the increased value of your home so they can adjust your coverage levels accordingly.

High Value Possessions

Your policy will cover your personal belongs should they be stolen or destroyed. The majority of policies cover personal belongings up to 50 percent of your dwelling limit. However, most policies have separate, much lower limits for high-value items such as collectibles, jewelry, art and even silverware.

The coverage limits for these types of items is typically set between $2,500 and $5,000. In some cases the policy will not offer coverage for lost or damaged items. You should also be aware that many polices pay out an actual cash value which is the depreciated value of the item instead of replacement value, which would pay the full cost of replacing the item.

Filling in this gap requires a separate rider for high value items. You can usually purchase a rider for roughly $15 per $1,000 in coverage. This allows you to buy the exact amount of coverage you need to cover your collectibles. This coverage is well worth the cost to protect your valuables.

Please review our FAQ page to help you find answers to questions like: What is replacement cost coverage and actual cash value?

Working From Home

If you work from home or have an office at your house there is a good chance that you are underinsured in regards to your business equipment. The majority of policies limit total coverage for business equipment to a paltry $2,500. If your home office equipment is destroyed or stolen you could be responsible for thousands of dollars to replace it.

It is possible to purchase a separate home office policy for roughly $300 dollars a year. This policy would offer full coverage for your office equipment. It is important to make sure the policy includes replacement value on your equipment.