Homeowners Insurance Disaster
Takeaways
• Home values often rise faster than policy updates, creating hidden coverage gaps.
• Guaranteed replacement cost (or 100% replacement cost) should be reviewed with your insurance professional.
• Most homeowners cannot cover a high deductible without a properly funded emergency reserve.
• Millions of U.S. homes are underinsured due to outdated policies or misunderstood contracts.
• Financial planning requires holistic risk management — not just investment oversight.
Homeowners Insurance Disaster – Links
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Watch this episode (“Homeowners Insurance Disaster”) on our YouTube Channel
Link to Survey mentioned in video
Homeowners Insurance Disaster – Transcript
Homeowners Insurance Disaster Transcript
Hey, I want to talk about your emergency fund.
There was a post on Twitter where a woman was in tears, and I feel bad.
This woman’s home burned to the ground. That’s terrible.
But the REAL DISASTER is she just learned – AFTER the home burned to the ground — her homeowners insurance won’t put her house back the way it was.
In fact, the insurance will only cover a FRACTION of the cost to rebuild her home.
And I THINK this is the kind of situation MANY people just “put out of their minds”
— and try not to think about their home burning to the ground, or getting wiped out in a flood, or some kind of disaster.
Like a lot of people today, the value of this woman’s home had gone up (significantly) over the last couple of years, and she is (just now) finding out — her insurance will only cover what it was worth a few years ago.
You need to speak with your insurance guy (or gal) and talk about what it will cost to replace the home, and your homeowners insurance, if it’s destroyed from a fire or flood from any disaster.
Talk to them about guaranteed replacement cost coverage. Sometimes it’s called 100% percent replacement cost.
Find out what this costs. It will be (and should be) expensive.
You may have bought your home for $250k years ago
And now that same home is worth $900k. Your insurance coverage should keep up.
The, the worst part about this tweet was the last line of the tweet. They wrote, “insurance is a scam. They do everything possible to not pay out.”
Please understand insurance is NOT a scam. Sure, we all feel that way – periodically – when we find out that something in our medical coverage isn’t picked up, or we’re on the hook for more than we expected.
But it’s not a scam.
It’s a business contract. It’s a legal agreement between two parties. It is ON YOU to understand the contract you agreed to!
You should read it.
We’ve had conversations with people who say,
“Hey, I’d rather have a higher deductible since that will lower my premium.”
(We say) Okay. Do you have that deductible ($5k $10K) sitting somewhere — in an emergency fund?
Because it IS a true emergency – when your house burns to the ground or is destroyed in a flood.
What we’re finding is something different — survey after survey shows large percentages of people across the country have trouble putting their hands on $1,000.
By the way, borrowing money from your 401k is NOT an emergency fund!
An insurance company did a survey, and we’ll link to it in the show notes, and found some very interesting results.
18% of homeowners say their current home insurance policy doesn’t provide enough coverage to fully replace or repair their home in the event of a loss.
BUT – the survey also showed 38% of American homeowners say they DON’T KNOW HOW to tell if they’re underinsured.
This means the real number of underinsured homes may be a lot more than we even think.
This is the part that — as financial planners — that just really surprises us.
59% of the folks who participated in this survey, 59% could not afford a deductible payment of $5,000 or more if their home was seriously damaged today.
The survey concludes that at least 42 million homes are under insured.
Financial planning is NOT just about your investments and the stock market. It encompasses your entire financial picture.
That means staying in contact with your insurance professional to keep your coverage up to date, and also knowing you have enough set aside — in cash — to cover emergencies.
Because a fire that burns your home to the ground IS an emergency.
Thank you for watching Homeowners Insurance Disaster
