May 26th, 2015
Many mortgage lenders require homeowners to insure their house. However, while these homeowners might have some insurance, approximately 64 percent of of these individuals have less insurance than they really need, Marshall & Swift reported. Meaning if something were to happen to their houses, these people would only be able to rebuild about 81 percent of the home.
The sad truth is that too many homeowners lack the adequate insurance to properly rebuild after a tragedy strikes. This is especially true of people who own homes in disaster-prone areas. Many people might think the recent downturn in the housing market - which sent home prices down - means they do not need to upgrade their home insurance. Homeowners insurance uses the cost to rebuild the house as the reference point, not the actual market price.
Work with your insurance company to discern what coverage works best for your home. You don't want to be left scrounging for more money after a disaster strikes. You might think it can never happen to you, but a residential fire breaks out every 23 seconds, according to the U.S. Fire Administration. Meanwhile, the Federal Bureau of Investigation reported 1,289,030 homes were burglarized in 2013. These figures paint a pretty grim picture of how vulnerable your home is to fire and burglars. The minimum amount of homeowners insurance your mortgage lender mandates most likely does not cover every potential risk your house faces.
Be sure you regularly update your coverage to ensure your house is properly protected. You might be surprised what you can cover. For instance, while most homes in flood-prone areas will probably not be covered, a quarter of flood insurance claims come from homeowners who do not live in these areas, the Federal Emergency Management Agency reported.
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