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Is my home over-insured?

tony • November 23, 2019

Often times we have customers call in to shop their home insurance and in the process of reviewing their coverages we find that they’re over-insured.  We typically see people over insured in two areas – dwelling coverage and personal property coverage.  Before we explain these things, please note that we believe it’s always better to be over-insured than under-insured, but you want to make certain you’re not grossly over-insured and throwing money down the drain. 

So let’s break this down…

Your dwelling coverage is the amount of insurance you have on your home to rebuild your home if the worst-case scenario happens and you sustained a total loss.  Keep in mind that this coverage is not how much your home is worth.  Insurance companies don’t insure the market value of your home but instead insure the cost to rebuild and the amount doesn’t include the land value. 

The most frequent occurrence we see of homes being over-insured is when the initial policy has an inflation guard, and the customer has been with the same carrier for a long period of time.  In some situations, we’ll see the dwelling coverage far out-pace the increasing costs of labor and materials resulting in a home significantly over-insured.  As an example, a home with $250,000 in dwelling coverage with a 5% inflation guard would have nearly $330,000 in dwelling coverage in just five short years…..in 10 years the home would be insured for over $400,000.

Your personal property coverage is the amount of insurance you have for personal belongings in your home which are not attached to the home.  This coverage doesn’t generally provide adequate coverage for big ticket items such as jewelry or collectibles and it doesn’t generally cover motorized vehicles.  What we’re left with are couches, beds, televisions, dressers, dining room tables, chairs etc etc. 

The home insurance policy will generally provide automatic coverage for your personal property in an amount equal to 50% of your dwelling coverage.  So if have $250,000 in dwelling coverage, your policy will typically cover up to $125,000 for personal property automatically if you don’t address this coverage.  But what if you’re a first time home buyer without a ton of personal belongings or what if you’re a minimalist and only have thirty thousand dollars of stuff or what if you live alone and have empty bedrooms in the home – you get the picture.

So what should you do….

If your insurance company or agent is not already reviewing your coverages annually, specifically, ask them to double check your dwelling coverage to ensure you’re not over or under insured.  And second, do an inventory of your personal belonging and calculate how much it will cost you to replace all these items with new ones.  Compare that amount to your personal property coverage.  If you’re over insured, inquire about reducing this coverage.

Want to see what insurance rates look like in your area?  Get a quote online at shopitnow.chrinco.com or give me a call at 321-586-3754.  Chrinco.com – insurance simplified.

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