Georgia homeowners often make a costly mistake. Most don’t even know they are making it.
There are about 2.7 million owner occupied homes in the Peach State. While most Georgia homeowners would never think about not insuring their home, many fail to protect it adequately.
Nearly two third of homes nationally are underinsured. Georgia is no exception.
What am I getting for my insurance premiums?
TrustedChoice.com reports that the average Georgia homeowner pays $1,089 a year to insure their home. That’s about $225 less than the national average. Here’s what that premium buys in a standard homeowner’s policy:
Physical Structure
Insurance covers the costs to repair or rebuild your home, and in most cases, detached buildings like garages and sheds, as long as the damage is caused by a covered risk like:
- Fire and lightning
- Wind, tornado, and hail
- Hurricane
- Theft and vandalism
Damage caused by floods, earthquake, or from living in your home are not covered. There may also be other exclusions in your policy regarding pets, valuables, antiques, business equipment, etc.
Contents
Homeowner’s policies reimburse for the cost to replace personal items like clothing, furniture, musical instruments and other household contents destroyed by any of the covered risks. There are limitations on the reimbursable amount, usually 50 to 70 percent of the coverage on the main structure.
Liability
If you, a family member, or pet injures another person or damages their property, the liability portion of your policy pays for repairing the damage, legal expenses, and court awards. The amount of coverage is subject to the limitations stated in your policy
Additional Living Expense
If you cannot live in your home because of damage from a covered risk, additional living expense (ALE) coverage pays for expenses over and above your usual costs of living, like hotels and dining out, while your home is being rebuilt.
With all that coverage, how can I be underinsured?
Keep in mind that having coverage is not the same as having enough coverage. Here are the most frequent ways people underinsure their homes and short change themselves:
Home Valuation
Many people insure their homes for the amount they paid for it. Others insure only for the mortgage amount of 80 or 90 percent to satisfy a lender. Neither reflects the actual cost of repairing or rebuilding a destroyed home. The minimal premium savings are usually erased by the first claim.
To protect themselves homeowners should:
- Find out the actual replacement cost of the home and insure for that amount
- Check the exclusions in the policy for anything that should be covered
- If you are in a flood zone, get flood insurance. The cost is minimal and the return, if your home is damaged by a flood, is enormous.
Contents
Insurance companies recommend a home inventory to document personal belongings and contents of a home. Unfortunately, many people never quite get around to it. Worse, they often undervalue the contents of their home or leave out items like landscaping. In many cases, the value of the contents lost in a disaster is far greater than the covered amount and homeowners have to pay to regain their lifestyle.
Liability
The usual starting point for liability coverage is $100,000. For some that may be enough. For many, it will not. Homeowners who have assets in excess of the liability coverage amount can protect themselves with additional umbrella liability coverage.
Additional Living Expense
ALE requires the insurer to provide comparable accommodations. In the rush of trying to find a place to live during a home disaster, many pick the first, and often cheapest, place they can find. This is rarely comparable to your home, and you will be there a while. Don’t short change yourself.
Don’t be Left Holding the Tab
In 2015, insurers paid out $1,605,767,000 in Georgia homeowners claims. Taking into account that two-thirds of the covered homes were probably underinsured, a significant amount of money was left on the table and out of homeowners’ pockets.
Taking the time to put real values on your home, contents, and assets will return dividends in the long run. Otherwise, you could be left holding the tab.
