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For many people, their home is their greatest investment. Still, studies show that about 60% of homes are underinsured by an average of around 20%, according to the Insurance Information Institute. Here is a checklist to help you think through how much homeowners insurance you might need:
It is recommended that you have enough insurance to cover the cost of rebuilding your home at current construction costs, minus the value of the land (note: this is not the same as the tax or sale value of the home). Your Wells Fargo insurance agent can help you determine how much it will cost to rebuild your home.
Most homeowners insurance policies provide coverage for your personal possessions at approximately 50 to 70% of the amount of insurance you have on the structure of your home. The best way to determine if this is enough coverage is to conduct a home inventory, which details everything you own and the estimated cost to replace these items if they are stolen or destroyed. Remember to keep your home inventory in a safe place (perhaps your safe deposit box).
You can insure your possessions in two ways: by their actual cash value or their replacement cost. Consider this example: A fire destroys a 10-year-old television set in your living room. If you have a replacement cost policy, your TV will be replaced with a comparable new one. If you have an actual cash value policy, it will pay only a percentage of the cost of a new TV because the old TV is worth a lot less than its original cost. The price of replacement cost coverage may be well worth the investment.
Do you own expensive items such as jewelry, silverware, or fine art? When shopping for homeowners insurance, ask about coverage limits on luxury items and consider buying a special personal property floater or an endorsement. These allow you to insure these items individually or as a collection. And with floaters and endorsements, there is usually no deductible. You are charged a premium based on what the item (or collection) is, its dollar value, and where you live. You can determine the value by providing your agent with a recent receipt or getting the item or collection appraised.
Coverage for additional living expenses pays the extra costs of temporarily living away from your home if you can’t stay in it due to damage caused by an insured disaster such as a hurricane. This covers hotel bills, restaurant meals, transportation, and other living expenses incurred while your home is inaccessible or being rebuilt. It’s important to note that it covers only those expenses that are over and above your regular living expenses, so it would not cover your mortgage, or regular trips to the grocery store. If you rent part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been damaged or destroyed.
Liability insurance covers you against lawsuits for bodily injury or property damage that you, your family, or your pets may cause to other people. Liability insurance pays for both the cost of defending you in court and for any damages a court rules you must pay—up to the limits of your policy. Most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available. If the standard liability coverage in your homeowners policy is not sufficient, you may need what’s known as an umbrella policy. This provides additional liability coverage over and above what is covered in your home and auto insurance policies.
Still not sure you’ve got the right coverage? Our experienced team of licensed insurance agents can help you. Check out Wells Fargo Homeowners Insurance to learn more.
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Wells Fargo Insurance, Inc. (Minneapolis, MN) is a licensed agency that represents — and is compensated by — the insurer based on the amount of insurance sold.