Homeowner’s Insurance

By Mark Bertrang, The Creator of the Financialoscopy® on Thursday, May 23rd 2024

 

We will be doing another deep dive into 1 of our 25 cards that portray different areas of your life and financial life. A lot of people don’t realize how one of these cards could possibly affect the others. Today, we will be discussing homeowner’s insurance.

You may not know this, but I’m also a fully licensed homeowner’s insurance agent, even though we do not sell homeowner’s insurance here. I stay licensed and keep my continuing education current every year so I can speak with clients about this topic whenever it’s appropriate. 

Most people would wonder what their homeowner’s insurance would have to do with their financial life. Well, maybe you’ve heard it said that your home is often the largest, single asset of your life. If that is the case for you, you may want to insure it for its full value. Just this last weekend I received the statement of my annual premium, which seems to keep going up every year and none of us really want to pay those increased premiums, but in reality, it should go up every year because the price of rebuilding your home goes up every year.  Your insurance company calculates this and adjusts your policy to make sure there will be enough money to replace your home.

For the sake of this blog, I looked at the value of our house from different sources. Since I am married to a realtor, she knows roughly how much the house would sell for. Let’s make it easy and pretend that our house would sell for $1,000. I’m just using $1,000 to make it easier to explain the other estimates. According to our property taxes, the county believes that the fair market value of our house is $826. If I go on Zillow for a “Zestimate” (that’s what they call their estimates), they believe our house could sell for $520. They obviously really underestimated the actual sale price.  

So, for our example, my $1000 house has a replacement value of $1,722 on my homeowner’s insurance. That’s quite an increase. Why? Let me ask you this: When was the last time you had a homeowners insurance agent come into your house to do a walk-through to determine its actual replacement cost? We all want to pay as little as possible for our premiums, but if your policy undervalues your home and is short on its coverage and then a tornado takes it away or a fire burns it to the ground, what is the replacement value that you will get? What is the dollar amount that you would receive in compensation? It’s all about replacing the value of your home. If you have a beautiful home, but you only have enough coverage to move into a double-wide trailer after your home burns down, is that really what you want? Additionally, if an adjuster needs to come to your home to assess damages, do you have documentation of the value of your home and all of the possessions inside of your home, your “stuff”? Do you keep it in a safe place or is the documentation in the house that just burned down?

This is why we look at these 25 different areas of your life because if your home is not insured and documented properly, then it may not matter what you have in your 401K. Your 401K may have to pay for mistakes that were made with your homeowner’s insurance not being properly calculated to your home’s true replacement value. This is just 1 of 25 areas that you may believe has nothing to do with your assets and money that you have saved up for the rest of your life. If just your homeowner’s insurance is not set up correctly, what about the rest of these 25 aspects of your life?

Perhaps, just based on this conversation alone about the value of your single, biggest asset, you’re already thinking it’s time for you to schedule your Financialoscopy®.

 


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