Imagine this: a client experienced a near-total loss when an electrical fire broke out at home after a lightning strike. Expecting insurance to cover the damages, he was shocked to discover he was underinsured and had to pay out of pocket to rebuild his family’s home.
This scenario is all too common, and it’s a rude awakening coming to roost for many homeowners who suffered home and property damage in the wake of Hurricane Helene.
In fact, 60 percent of homes in the U.S. are underinsured by an average of 20 percent. Many homeowners don’t realize their coverage is insufficient until a disaster like Helene strikes. If this concerns you, it’s time to reassess your policy to ensure you’re fully protected.
Are You Sacrificing Coverage for Savings?
With inflation driving up costs, many homeowners in South Carolina are looking to reduce their expenses, including insurance premiums. In 2023, our state’s average annual home insurance premium was around $2,500. To save money, some policyholders lower their coverage. However, this can expose you to serious financial risk in case of an accident or disaster.
Since 2021, rebuilding costs have risen by 36 percent, meaning many insurance policies haven’t kept pace. The average cost to rebuild a home in Greenville, SC, ranges between $150 and $250 per square foot, depending on materials and design. For a typical 2,000-square-foot house, rebuilding costs could range from $300,000 to $500,000.
If your policy doesn’t reflect these costs, you may pay a significant amount out of pocket for repairs.
Key Risks of Being Underinsured
Here are a few critical factors to consider when evaluating your current coverage:
- Rising Rebuilding Costs: If your insurance hasn’t been updated to match rising home values and inflation, you might lack the coverage to repair or replace your home after an incident. Rebuilding costs in South Carolina, especially in the Upstate, are rising as the region grows, leaving many homeowners underinsured.
- Liability Gaps: In the event of an accident, insufficient liability coverage could lead to lawsuits, wage garnishment, or loss of savings. This is especially important if you only carry the legal minimum coverage.
- Natural Disasters: The severity of storms is on the rise. The aftermath of Helene is proving wind, hail, and water present serious opportunities for damage, and standard policies often don’t cover these risks, leaving homeowners financially vulnerable.
- Home Improvements & Asset Growth: Have you made home improvements or acquired more valuable assets? If your policy hasn’t been updated, your current coverage may be inadequate to replace your belongings or repair your home.
- Auto Insurance: Don’t forget about your auto insurance needs. Rising repair costs have hit drivers hard, and being underinsured could result in serious financial strain if you’re involved in an accident. Many drivers carry only the minimum liability coverage, which may not be enough in a severe accident, leaving both parties vulnerable to out-of-pocket costs. This can be especially damaging if you rely on your vehicle for work.
How to Avoid Being Underinsured
The best way to ensure you’re adequately covered is to review your insurance policies regularly and adjust them as your needs change. We’ve been explaining how inflation guard policies work to adjust coverage limits to match rising costs automatically. This can help ensure you’re fully covered in case of a disaster.
Even if your home improvement projects weren’t major or were paid for in cash, you might still be underinsured if replacement costs would require significant out-of-pocket expenses.
Additionally, many mortgage and loan agreements require that properties or vehicles be insured up to a specific value. Being underinsured could violate these agreements and lead to penalties or complications.
Don’t Wait Until It’s Too Late
The next storm, accident, or fire could leave you in a bind. Now is the time to review your policies and identify potential gaps that could jeopardize your financial security.
Contact us today for a free consultation to ensure you’re fully protected. We’ll review your home and auto insurance policies to make sure you’re prepared for whatever life throws your way.