Published by REALTOR.com | October 3, 2024
Are you confident that if your home sustained damage from a fire or hurricane that your homeowners insurance policy would provide sufficient funds to rebuild?
The devastating property damage from Hurricane Helene is casting a spotlight on that question, and the answer isn’t always what homeowners expect.
“Many homeowners don’t understand what they’re covered for,” said Spencer Houldin, an insurance broker in Washington Depot, Conn., with 33 years of experience advising clients on homeowners policies. “One of the most common mistakes I see is owners not buying enough coverage on the house to rebuild it.”
Houldin said that about 35% of new clients who walk in his door are underinsured and lack sufficient replacement coverage to rebuild their homes.
A 2022 survey by the American Property Casualty Insurance Association, a trade group, found that a majority of insured homeowners had not taken steps to ensure their coverage was keeping pace with inflation and increased building costs, which could leave them underinsured if a catastrophe strikes. According to the survey, only 30% of insured homeowners had increased their coverage to compensate for rising building costs, and less than half (40%) updated their insurance after completing renovations or a remodel.
When you consider that, on average nationwide, the costs of construction materials and labor increased by 40% and 16%, respectively, between 2019 and 2023, according to real-estate data firm CoreLogic, that means that a lot of homeowners are currently underinsured.
“Many people got a little complacent,” said Jeffrey Burns, a senior global real-estate adviser with Premier Sotheby’s International Realty in Sanibel, Fla. “They thought that getting just-enough insurance would be okay and they would be covered.”
Burns, who works in an area devastated by Hurricane Ian, which made landfall on the west coast of Florida in September 2022 as a Category 4 storm, said that a large percentage of his clients over the past two years have been local owners who opted to sell their damaged homes because they didn’t have enough insurance to rebuild.
If you’re in the market for homeowners insurance, or want to ensure you are adequately protected, here are some things to consider.
