The cost of repairing or rebuilding your home and replacing your lost property after a disaster can reach tens of thousands of dollars, if not more. Your homeowner’s insurance policy is supposed to be a safety net to protect you after a devastating loss, but the coverage you purchased may not be enough.
The knowledgeable insurance claim attorneys at Kirk Law Firm, PLLC put together this guide for homeowners like you. Keep reading to learn what underinsurance is and how it can affect your homeowners’ insurance claim.
What is Underinsurance?
Underinsurance is a commonly used term to describe a homeowner’s policy with coverage limits that are too low to pay the full cost of your losses, ultimately affecting the outcome of your insurance claim. You are ultimately responsible for paying this financial gap out of pocket. For example, if you received a $400,000 quote to rebuild your home after a total loss, but you only have $250,000 in policy coverage, you are underinsured by $150,000. If you want to proceed with repairs, you must pay that balance with your own funds.
The rising costs of licensed contractors, building materials, and permits can lead to this unfortunate situation. Other factors, such as previous claims and failing to update your policy limits, may also create an underinsurance scenario. Unfortunately, you may not know you are underinsured until it is too late. Your coverage may not keep up with inflation, or perhaps you chose the lowest limits when you purchased your policy to save money. Either way, this deficit is now your responsibility.
How Does Underinsurance Affect Your Homeowner’s Insurance
Underinsurance can cause financial hardship for many homeowners. You are likely to be left with insufficient coverage to rebuild your home and replace your belongings, and may need to take on debt to cover the difference. If you cannot come up with the funds, you may even lose your home.
However, many policies require homeowners to insure their home for a minimum of 80 percent of its replacement cost, which is a very different number than its fair market value, due to labor and material expenses. Failing to meet this threshold puts you at risk for a co-insurance penalty that can reduce your insurer’s payout.
Consult with a Resolute Attorney Who Understands How Underinsurance Can Affect Your Homeowners’ Claim
Now that you have a better understanding of what underinsurance is and how it can affect your homeowners insurance claim, it is time to reach out to Kirk Law Firm, PLLC. Our Texas-based firm specializes in property damage insurance claims like yours.
Schedule your free consultation early in the claim’s process so our team can negotiate on your behalf before you receive a denial. Do not accept your insurance company’s long list of excuses why they do not want to pay. Let us file your claim properly and guide you through the process to the best outcome in your unique situation.
