Often when you discover you didn’t have enough insurance it’s too late
The unfortunate event that could never happen in a million years just happened
The worst time to review your insurance coverage is after a claim
Here are a few scenarios when you don’t have enough insurance
The cost of building materials have gone up significantly the last few years
Insurance companies add the inflation guard % to your insurance value to increase each renewal by a specific percentage but the cost of materials has increased at a rate that a 1-5% inflation guard can’t keep up
It is possible your home is now under-insured and subject to the Coinsurance Penalty on your next claim check
Each property insurance policy will have a Coinsurance Penalty usually set at 80%
This states you must insure your home at least 80% of the cost to rebuild your property (replacement cost)
If not your claim check is subject to a penalty with the percentage deducted that you under-insured your property
I like to give the example of a guy named Bob
Bob didn’t believe in insurance but with a two story house and no lender he thought he would just buy a little bit of protection and wanted to insured half his house
It was a two story 3000 square foot and probable cost at a minimum 500,000 to rebuild
He said “insurance is so expensive I just want 250,000 of insurance”
I said “that appears to be only insuring half your house”
He said “ok”
I said “Well which half?”
If a claim happens on the second story bathroom did you intend to insure the second story or just the first?
Pro Tip: Monitor the cost of building materials each renewal to make sure your home is still insured for the cost of you to hire a contractor to rebuild your home
Car Insurance
When I was a High School senior I needed to get the required liability limit on an old truck so I could legally drive
I had no assets
I didn’t own a house, have money or really anything of value that I didn’t mind losing
The minimum limit of liability at the time was 10,000
If I were to cause injury to another person or another person’s property damage all my insurance company was going to pay was 10,000
As I got older and started to acquire assets I had to increase my liability coverage because I had stuff I didn’t want to lose
Like a house, a car, my savings account, future wages
If something bad happened and I made a mistake I needed to know my insurance company would pay the bill
My ability to earn an income is my most valuable asset and future wage garnishment scared me
When an accident happens you need to know that if you have to walk into a courtroom you have enough liability insurance to not affect your future
The goal is to get to 250,000 Car Insurance liability so you can qualify to purchase a personal umbrella policy
The Personal Umbrella policy is the policy you need to protect your bank account and your ability to earn an income
The most common claim from a tenant is going to be the slip, trip and fall
We have processed hundreds of these claims over the years
The bad news is it doesn’t matter if you are liable or at fault
Depending on the area your rental property exists will determine if you have a chance to defend yourself in court or your liability policy must pay
The good news is as a rental property owner you can also get an umbrella policy
If your policy only has 300,000 liability limit you can get an additional layer of liability up to 1,000,000
One option for Real Estate owners is to get all your properties on one policy that includes 1,000,000 of liability
Not sure you could ever have enough Liability insurance
It is ok to buy too much liability insurance and just hope you never have to find out did you buy enough?
Before a claim happens you should evaluate your Property Insurance Limit to determine you have enough to rebuild using today’s cost of building materials and consider an additional layer of liability up to 1,000,000 by buying an Umbrella policy
If you are ready for an Insurance review just complete the form below to get started
