part of a four part series on homeowners insurance pitfalls

hurricane insurance disaster

Homeowners Insurance is designed to provide peace of mind when disaster looms, but some people will find themselves underinsured without the proper guidance from a trusted agent. There are so many questions about what coverage is available and what it specifically covers, that many people find themselves in a pickle when they need to file an insurance claim.

Insurance experts say that failing to have enough insurance to cover the cost of rebuilding your home is the absolute biggest mistake homeowners make. One 2009 study found that two-thirds of homes are underinsured.

How could this happen? Unfortunately, many homeowners only buy enough insurance to cover the amount of their mortgage. Many people don’t consider that your mortgage may be, at most 90% of the value of the house depending on down payment and appreciation. (See our article on construction vs. reconstruction costs)

Anther pitfall is to only insure an amount equal to the current value of their homes, but the cost of rebuilding your home could cost far more money. Consider that in the event of a natural disaster, both the cost of labor and supplies spike in a market desperate to rebuild.

“So many people don’t consider the cost of clean up in case of a natural disaster. Just clearing the land of debris can cost as much as $50,000!” -Cindy Koegel, Gillman Insurance Problem Solver

What do to: 

Always use the replacement cost estimator provided by your insurance carrier. This estimator determines how much it would cost to rebuild your home, and makes sure that your insurance coverage is adequate for a full replacement.

“I get so nervous that people don’t understand the value of having a replacement cost estimator,” says Cindy Koegel, “Regardless of what you paid for your home, you want to insure it for its replacement cost value (determined by the estimator).  If your homeowners policy provides coverage, which is less than the estimated value, you may still not be able to restore your home to its original state in case of a disaster. The Replacement Cost Estimator asks you questions about your home and can add an additional endorsement of up to 25%. So that designer kitchen you just installed with high end appliances? It doesn’t have to be replaced with builder’s grade in case of a covered total loss.”


For more information, contact Cindy Koegel, a Gillman Insurance Problem Solver at (678)297-7977 or email her directly.

This Blog Post is part of a four-part series on the pitfalls of homeowners insurance and how to avoid them. To read additional articles on the topic please check out Scheduled Jewelry Insurance Coverage, Flood Insurance in Georgia, and Mold and Sewage Backup in Atlanta.