Home insurance policies are great. They help us in bitter times. But that is the case when we have full coverage. Unfortunately, homeowners’ insurance policies have many gaps in them. Which we are usually unaware of. But once we get enlightened and obtain these, we are secure. We can rest assured, that even if the worst happens, we are prepared. Insurance will definitely prove to be a boon then. At times you may feel these are a burden. But trust us our friend, they are not. Thus, here we have the most dangerous home insurance gaps to look out for.
5 Home Insurance Gaps to Look Out For!
Below are the 5 most quintessential examples of home insurance gaps to look out for!
Gap #1: Dwelling limit should be the rebuilding cost:
The dwelling limit is the limit up to which your insurance company will reimburse you if your house is damaged completely. And this dwelling coverage limit should be at least 80% of the money required to rebuild your house. Your insurer will estimate this for you. But you must do it yourself too. Because it is your safety that is at stake. So, ‘HMFacts’ is a website that will let you do it at a nominal fee.
Other riders to the policy that are must-haves for every one of us:
1. Inflation Guard:
Consider the situation where you estimated the cost of your property in the best possible manner and got a good cover. But that was some 10 years back! The construction costs are subject to many factors, and they must have skyrocketed by now. So, now what do you do? You take an inflation guard with your policy. This will increase your coverage every year according to the inflation rates and other factors.
2. Extended Replacement Cost:
Generally, the payout structure of the insurance is the ACV type. Which takes into account the depreciation of the house over time. While RCV doesn’t consider that. But, even RCV doesn’t cover the surge in construction costs when a disaster occurs. But you are covered with that through an ERC policy. And the good news? It comes at an extra 20-25% premium.
3. Ordinance and Law Coverage:
Another gap in home insurance is that when you are rebuilding your home, you need to follow the new building standards. This may require a lot more money. But with this coverage, you are covered for that too. You can hike your coverage to about 25% more for about $50/year more.
Thus, with these gaps filled, you are more secure with your dwelling coverage at least!
Gap #2: There are Limits to High-Value Personal Property:
You must probably be knowing that your personal property coverage is typically about 50% of your dwelling limit. But a gap here that you may not be knowing about is that the high-value personal property coverage in this is not more than that $1000 -$2500. Thus, if your high-value property values more than this, it is time for you to start shopping around for a separate rider for this.
Your high-value property is your jewelry, stamps, silverware, etc. And this can many times easily cost more than $2,500. So, be vary and do consider a rider. Plus, it does not cost more than $10 or $20 a year for every $1,000 increase.
One more point to consider here is that the personal property is by default set to the ACV payout method. Thus, a television set which is just 3 years old, will not fetch you enough money to replace it. So, do remember to ask for an RCV policy.
Gap #3: The Deductible Trouble in Windstorms and Hurricanes:
Windstorms and hurricanes insurances are a relief to so many who live in storm-prone areas. Only we know the destruction and trouble these disasters cause. But additional trouble is on its way.
You must be knowing that a deductible is required if you want to claim your money in a homeowners’ insurance policy. But, in the case of windstorms and hurricanes, the deductible is bigger. This deductible can even go to 5% of the insured amount.
For example, if your insured amount is $3,00,000, then your deductible can reach a maximum of $15,000. So, do ask about this from your insurance agent before buying a policy.
#4: Floods can wash away a lot:
Floods are occurring almost everywhere. And even people outside high-risk flood zones must start considering this policy. As in 2015, almost 20-25% of people who filed a claim did not belong to high-risk flood zones. But we are talking about gaps in your home insurance policy. And one of them is that it does not give coverage for flood. Yes, surprising isn’t it? Most policy owners learn this the hard way.
Well, you need a separate rider or policy for this. And the new policy takes 30 days to become effective. There are still some more gaps left if you take up this flood policy. It does not cover personal property kept in your basement. So, be wary of this!
#5: Do you have a home-based business?
Well, you are not alone. 12% of all households are doing the same. But, a gap in your homeowners’ insurance policy is that it does not cover your business’s liability even if you are running it from home. It can still cover your business property up to an amount of $2,500. But, not more than that.
For example, if you have a home bakery and clients are coming to your home to take deliveries. Then watch out, if they get hurt during the visit, then they may sue you. And your home insurance policy will not cover you in the process. You need separate business insurance for that. Plus your business insurance will also give you additional coverage of auto insurance, workers’ compensation, etc. Thus it is absolutely mandatory for you to take up a business policy. Also, it comes at around $200 a year. Affordable isn’t it?
Thus, we can say that a homeowners’ insurance policy is a blessing. But if these essential gaps are not filled it may well go futile. Thus, do look out for these gaps in the home insurance policies. As they may make or break the day.
We hope you liked our article on home insurance gaps to look out for. If you find more gaps or have some questions about these, please do communicate through the comment box. We will reply ASAP!