Disasters that can strike your home — including hail, windstorms, fires and tornadoes — are always traumatic. By carrying sufficient homeowner’s insurance, you can at least have some peace of mind knowing that you’ll be able to recover. But typical coverage is often based on three factors: what you paid for your home, its current market value and your mortgage. This may leave you short when it comes to rebuilding your home and replacing your possessions.
“Since insurance recovery is one of our specialty areas of practice, we often find that our clients’ policies are insufficient to cover the damages they’ve suffered,” says Matthew R. Pearson, founder of Pearson Legal, L.C. “They may not be aware of policy provisions that can limit their benefits after a loss.”
Here are some points to keep in mind to be certain you’re adequately covered:
1. Do you have enough insurance to cover your home and your possessions?
You are usually given a choice between actual cash value (ACV) or replacement cost value (RCV) coverage. RCV coverage will result in a higher premium, but it is highly recommended.
ACV coverage will only pay for the value of your property after a reduction for the age and condition of the property, while RCV provides full replacement value at today’s prices. Consider this: if your 20-year roof is ten years old and is destroyed by hail, you may not have enough insurance to replace it, if you only have ACV coverage. Assuming the RCV is $50,000, the ACV would only be $25,000, and this is before the deductible!
Also, since insurance companies often put a cap on personal property coverage, you may need to purchase an additional rider to cover your more expensive possessions.
2. Be sure that you’re carrying enough insurance to cover the unexpected
Even if you think your policy has sufficient coverage, there’s another important element to consider — Additional Living Expense Coverage (“ALE”). This protects you when your home has been rendered uninhabitable and you must temporarily vacate. You should have enough ALE coverage for hotels, meals and other living expenses that you will incur while repairs are being made. Check your policy to make sure you that won’t be caught short.
Likewise, Ordinance and Law Coverage protects you when your home requires upgrades above and beyond standard repair of the damage. For example, newer energy codes may have been adopted by your jurisdiction, along with modified construction methods that are designed to help your home withstand catastrophic storms, resulting in higher repair costs. Some municipalities require you to demolish and rebuild, even if your home is only partially damaged!
A standard policy may not carry enough of this coverage, so you will want to consider an endorsement to increase it.
3. Keep an eye out for these red flags
- Cosmetic damage exclusions. Because of the recent increase in violent storms, insurance companies have been inserting cosmetic damage exclusions in homeowner’s policies. This means that they won’t cover damaged property that is still functional. For example, a hail-damaged metal roof might continue to do its job, but it looks bad and brings down your home’s value.
- Excessive deductibles. A high deductible may give you lower premiums in the short term, but you could really take a hit when it comes time to file an actual claim.
- Your policy’s appraisal provision. Insurers often want to be in full control of the appraisal process and shift the costs to the insured.
- Unfair arbitration clauses. Another roadblock that insurance companies can put up are complicated rules and requirements written into the policy regarding arbitration, making the arbitration process unfair and depriving you of your day in court.
4. Do you require representation to collect from your insurance company?
If you suffered property damage and you feel that your claim has been wrongly denied or underpaid by your insurance company, contact us. Our team collectively has over 60 years experience in representing policyholders against their insurance companies — and we’ll help you to recover what is rightfully yours.