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Now is a good time to check on your homeowners’ insurance

by Chris O’Shea

With Hurricanes Harvey, Irma and Maria causing catastrophic damage, the list of worries is extensive. One line item? Insurance coverage. Do you — would you — have enough to rebuild your property and replace your belongings if you were caught in the eye of the storm?

According to a study from the real estate data company CoreLogic, more than 50 percent of homeowner insurance policies’ have a max payout that is less than the cost to rebuild a home in the aftermath of catastrophic destruction. Not only that, as CNBC reports, about 25 percent of homeowner policies cover less than 80 percent of the cost to rebuild the home. While keeping your premiums lows is a nice idea in theory, you could be tempting fate by not increasing the maximum amount your policy would cover in the aftermath of a total loss. (Note: Keep in mind that homeowner’s insurance does not cover flooding. You need to have purchased a separate policy for that.)

If you’re starting to panic, don’t. There are some steps you can take to make sure the amount of coverage you have under your homeowner’s insurance policy is sound. You first want to know what it would cost to rebuild your home. Ask a builder or contractor friend what it costs per-square-foot to build in your area and multiply that by the size of your home. When discussing your policy with an agent, get as many specifics as possible. While homeowners insurance seems like a nice, all-encompassing thing, it’s often not. In particular, you want to pay attention to the type of coverage you’re purchasing. Do you have cash-value coverage that only pays to cover the depreciated value of what is lost? Or the better replacement-cost coverage that pays to cover what it actually costs to replace something. (Guaranteed replacement cost coverage is the gold standard but infrequently written and tough to get.) Ask your insurer if you have enough coverage if you’re not feeling confident. Sure, adding items will increase your premium, but if something unfortunate happens, it will be more than worth it.