When you hear the word “insurance,” it probably doesn’t make your heart race with excitement. Let’s face it, most people think it’s a dull topic reserved for legal documents and late-night television commercials. But what if I told you understanding your homeowners insurance could save you thousands of dollars and protect your biggest investment? That’s where the story begins.
Imagine this: You’ve just moved into your dream home in Omaha. It’s a bright Saturday morning, and everything seems perfect until a storm rolls through. You rush outside to find part of your roof missing and half your siding flapping in the wind. You think, “No big deal. I’ve got insurance for this.” But that’s when the first question pops up—do you really know how much your insurance will cover?
Let’s break it down, using a bit of storytelling to make it easier to understand what’s at stake.
The Tale of Two Neighbors: Knowing Your Deductible
Meet Sarah and Mark, two homeowners living on the same street in Nebraska. After a freak hailstorm, both their roofs need replacing. Sarah calls her insurance company, only to discover she’s on the hook for a $5,000 deductible. She hadn’t read the fine print and was shocked to find out that her policy carried a percentage-based deductible for wind and hail damage.
On the other hand, Mark had worked with his local insurance agent to fully understand his policy. His deductible? $1,000. He had planned for it, saving money in a rainy-day fund specifically for emergencies like this. While Sarah scrambles to come up with the funds, Mark’s claim process runs smoothly.
Here’s the lesson: Deductibles aren’t one-size-fits-all. With the rise of percentage-based deductibles, your out-of-pocket costs could be more than you expected. If your home is insured for $400,000 and your deductible is 2%, that’s an $8,000 bill before your insurance kicks in. Ouch. This is why it’s so important to ask your insurance agent about your deductible, especially for wind and hail.
The Fine Print: Replacement Cost vs. Actual Cash Value
Now, let’s talk about the difference between replacement cost and actual cash value—two phrases that sound similar but have wildly different outcomes for your wallet.
Eric, a seasoned insurance agent in Omaha, likes to compare these two to buying a used car. If your 10-year-old roof is like a car that’s been driven 150,000 miles, it’s not worth what you originally paid. That’s how actual cash value works—it covers the cost to replace your roof, minus depreciation. So if your $20,000 roof is 50% depreciated, the insurance company might only give you $10,000 toward a new one.
Replacement cost, on the other hand, pays out what it costs to replace the roof today, no matter how old it is. Big difference, right? But here’s the catch: Some insurance companies are starting to limit replacement cost coverage for roofs over a certain age, typically 10 years or more. If your roof is older, they may only offer actual cash value, which leaves you footing a bigger part of the bill.
So, before you assume you’re fully covered, ask your insurance agent whether you have replacement cost or actual cash value coverage on your roof and home. Knowing this in advance could save you from being blindsided when it’s time to file a claim.
The Hidden Costs of Underinsurance
Here’s another situation Eric has seen countless times: Homeowners underinsuring their homes. It usually starts with good intentions. You’re looking to save money, and you think, “I’ll just insure my house for $300,000 instead of $400,000. That should be enough, right?”
Wrong.
If a disaster like a fire wipes out your home, you’ll be left with a check for $300,000 when the real cost to rebuild is $400,000. Worse yet, some policies penalize homeowners who don’t insure for at least 90% of the home’s replacement cost. That means if you skimp on coverage, the insurance company might only pay a portion of your claim, even for partial losses.
Eric’s advice? Don’t underinsure your home to save a few bucks now, because it could cost you everything later.
The Gold Hidden in the Attic: Personal Property Coverage
Let’s not forget what’s inside your home—your personal belongings. In many policies, personal property coverage is set as a percentage of the home’s insured value. For example, if your house is insured for $400,000, your personal property might be covered up to $240,000 (60%).
But what if you’re a collector? Guns, jewelry, or that stash of gold bars in the attic—these items often have internal limits. Your gun collection might only be insured for $5,000 unless you add a special endorsement to cover its full value. The same goes for jewelry, art, and other high-value items. If you don’t itemize these treasures, you could be out of luck when it comes to reimbursement.
The Final Word: Have the Conversation
Look, insurance isn’t the most glamorous topic, but having the right coverage is a crucial part of protecting your home and your financial future. Eric’s bottom line? Talk to your insurance agent. Sit down and ask the tough questions: What’s my deductible? Am I covered for replacement cost or actual cash value? What about my roof? And what’s the deal with my personal property coverage?
You don’t want to be caught off guard when a storm rolls through or a fire breaks out. Take the time to understand your policy now, so you’re not left picking up the pieces later. Just like Mark, with the right planning, you can protect your home—and your wallet—from those hidden costs lurking in the fine print.
Learn what Eric said about Business Insurance here
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Liz is Keybravo’s collaborative partner. She assists with a number of different tasks to include blog writing, editing, and proofreading. She and KB work together to bring you these highly useful blog posts based on the conversations KB has with his podcast guests on Leaders & Legends Podcast. We hope you enjoy this article and the work the team did to put this one of a kind content together for you. -Liz, CEO Keybravo LLC.
