Making Sure You're Not Underinsured When Disaster Strikes

There may be an even harsher reality facing homeowners victimized by the wildfires that continue to rage throughout California.

About 60 percent of American homes are underinsured, according to Core Logic, an Irvine-based company that provides information to insurers. The cost of being underinsured can be massive for homeowners: if your home is destroyed in a disaster, even if you get a check and settle your claim, that money won't cover the cost of rebuilding your home.

Core logic estimates that homes are underinsured by an average of 20 percent. To get an idea of what that means, consider the following example: If a $500,000 house is destroyed in a wildfire or other natural disaster, the homeowner would still come up $100,000 short on rebuilding the home after the insurance check clears.

That's a huge problem, and everyone needs to talk with their insurance agent to make sure their coverage will meet their individual needs since the value of a home can increase with improvements made over time. Anything from wood floors to solar panels can raise the value of a home, but it won't be covered if the insurance coverage hasn't been updated to include that increased value.

So here's what you do:

  • Talk to your insurance agent to make sure your policy covers the replacement cost of your home and most of what you own inside.
  • Inventory your home at least annually, taking pictures or video of what you have so it's documented.
  • Back up information like vital documents that you want to be able to save in an evacuation. Either pack them in a case you can carry or scan them and put them on a zip drive.
  • If your home does get damaged in a disaster, call your agent and start the claims process immediately because your claim could take a while to settle.
It sounds simple, but in an evacuation you won't have time to think, so it's all about preparation. For most people their home is their biggest investment; protecting it starts before there's a disaster.
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