Is Homeowners Insurance Enough?

If disaster strikes, will your homeowners coverage come to the rescue? While homeowner's insurance should be enough, the sad reality is that it may be too little. As a result you — the homeowner — may need to step it up. Your biggest problem in getting yo

April 1, 2010

Homeowners Insurance is designed to protect the homeowner, from a financial standpoint, in the event that disaster strikes. But what happens if the disaster is the most devastating and costliest in history?

The lessons learned from the tragic events of Hurricane Katrina cannot be ignored. The extreme circumstances dictated unconventional responses and improvisations that may even become the norm; but who knows how long it could take. Years later, there are still homeowner's waiting for their claims to be paid so they can rebuild and recover.

Those of us fortunate enough to not be affected by such devastating disasters can learn a few lessons about coping with potential disasters in the future. While homeowner's insurance should be enough, the sad reality is that it may be too little. As a result you — the homeowner — may need to step it up.

In the event of disaster, obviously contacting your home insurance company as soon as possible is the best way to go, but it doesn't have to stop there. Take steps to prevent further damage to your home if possible (i.e., cover holes in the roof with tarps, board up broken windows, etc.). Just remember to hold off making any repairs until you speak with your insurance company's adjuster first. Don't forget to keep your receipts, as you'll need them to prove expenses that can be reimbursed later.

You can generally expect your homeowners insurance to help pay for additional living expenses for up to 12-24 months while your home is being repaired. But, homeowners insurance usually pays only after they verify you have a legitimate claim. After Katrina, many insurers made an exception, automatically distributing enough to cover two weeks' worth of additional living expense to anyone in an area subject to mandatory evacuation. Some companies even gave small advances on contents under the personal property part of their homeowners insurance policies.

If you have to wait to get your check, it helps to have cash that is easily accessible in a bank account. Stashing cash at home isn't a great idea because if your home burns down and you weren't able to get to your cash, most homeowners insurance policies only cover $100-$200 in cash whether it is stolen or burned up in a fire.

Your biggest problem in getting your claim handled may be in either not having the proper homeowners insurance coverage or not having enough coverage. Most good homeowners insurance policies today cover up to 125% of your dwelling coverage limit. It is important that you review the dwelling limit with your agent every couple of years.