Why Americans Are Bailing on Their Home Insurance and What You Need to Know

Home insurance is one of the most important investments you can make as a homeowner.

Home Insurance Claim| Benedicts
Why Americans Are Bailing on Their Home Insurance| Benedicts

It protects your home, your belongings, and your liability in case of a disaster, theft, or lawsuit.

But despite its benefits, many Americans are choosing to go without it, either because they can’t afford it, they don’t think they need it, or they don’t trust the insurance industry.

According to a recent report by the Wall Street Journal, about 12% of US homeowners do not have home insurance, and the number is likely to increase as premiums continue to rise.

The national average for home insurance based on $250,000 in dwelling coverage increased this year to $1,428 annually, up 20% from 2022, according to Bankrate.

But skipping home insurance is a gamble that could cost you much more than the price of a policy.

Here are some of the reasons why Americans are bailing on their home insurance, and why you shouldn’t follow their example.

The Cost of Home Insurance Is Too High

One of the main reasons why some homeowners are dropping their home insurance is the cost.

Home insurance premiums are influenced by many factors, such as the location, age, and condition of your home, the amount and type of coverage you choose, your credit score, and your claims history.

Some of these factors are beyond your control, such as the increasing frequency and severity of natural disasters, the rising cost of labor and materials, and the higher demand for reinsurance.

However, there are some ways you can lower your home insurance costs without compromising your coverage.

ways you can lower your home insurance costs

The Coverage of Home Insurance Is Not Enough

Another reason why some homeowners are ditching their home insurance is that they don’t think it provides enough coverage for their needs.

For instance, some homeowners may have valuable collections, jewelry, or other items that exceed the limits of their personal property coverage.

Others may live in areas that are prone to floods, earthquakes, or other perils that are not covered by standard home insurance policies.

If you are in this situation, you don’t have to settle for inadequate coverage.

You can supplement your home insurance policy with additional options, such as:

1.Endorsements

These are amendments that add or modify the coverage of your policy.

For example, you can add an endorsement to increase the limit of your personal property coverage, or to cover specific items, such as fine art, antiques, or firearms.

2.Riders

These are separate policies that provide coverage for specific risks that are excluded from your standard policy.

For example, you can buy a rider to cover flood damage, earthquake damage, or identity theft.

3.Umbrella policy

This is a policy that provides extra liability coverage beyond the limits of your home and auto insurance policies.

For example, if you are sued for $1 million for causing a car accident, and your auto insurance only covers $300,000, your umbrella policy will pay the remaining $700,000.

The Trust in the Insurance Industry Is Low

A third reason why some homeowners are giving up their home insurance is that they don’t trust the insurance industry.

They may have had bad experiences with their previous insurers, such as denied or delayed claims, poor customer service, or hidden fees.

They may also have heard horror stories from other homeowners who were dropped by their insurers, or who had to deal with lawsuits or fraud.

While it is true that the insurance industry is not perfect, and that there are some bad actors out there, it is not fair to generalize and assume that all insurers are dishonest or incompetent.

There are many reputable and reliable insurers that offer quality products and services, and that treat their customers fairly and respectfully. You can find them by:

1.Checking their ratings and reviews from independent sources, such as the Better Business Bureau, Consumer Reports, or J.D. Power

2.Asking for referrals from your friends, family, or neighbors who have had positive experiences with their insurers

3.Reading the fine print of your policy and understanding your rights and responsibilities as a policyholder

4.Communicating with your insurer regularly and reporting any changes or issues that may affect your coverage or claims

5.Working with a licensed and experienced agent or broker who can guide you through the process and advocate for you in case of a dispute

Home Insurance FAQs

Here are some of the most common questions that homeowners have about home insurance, and their answers.

What is the difference between a homeowners policy and a home warranty?

A homeowners policy is an insurance product that covers your home, your personal property, and your liability in case of a covered event, such as a fire, a storm, or a theft.

A home warranty is a service contract that covers the repair or replacement of certain systems and appliances in your home, such as your HVAC, plumbing, or electrical systems, in case of a breakdown or malfunction.

What is a deductible and how does it work?

A deductible is the amount of money that you have to pay out of your own pocket before your insurance coverage kicks in.

For example, if you have a $1,000 deductible and you file a claim for $5,000, you will pay $1,000 and your insurer will pay $4,000.

The higher your deductible, the lower your premium, but the more you will have to pay in case of a claim.

What is the difference between property coverage and liability coverage?

Property coverage is the part of your policy that covers the physical structure of your home and your personal belongings in case of a covered event.

Liability coverage is the part of your policy that covers your legal responsibility for bodily injury or property damage that you cause to others on or off your property.

Does homeowners insurance cover theft?

Yes, homeowners insurance typically covers theft of your personal property, both inside and outside your home, up to the limit of your policy.

However, some items may have lower limits or require additional coverage, such as cash, jewelry, or firearms.

You may also need to provide proof of ownership, such as receipts or photos, to file a theft claim.

How much coverage do I need?

The amount of coverage you need depends on several factors, such as the value of your home, the cost of rebuilding or repairing it, the value of your personal property, the amount of liability risk you face, and your personal preferences.

A general rule of thumb is to have enough coverage to:

1.Rebuild your home at current construction costs

2.Replace your personal property at current market value

3.Cover your legal expenses and judgments in case of a lawsuit

4.Pay for your living expenses if you have to move out of your home temporarily

What are endorsements?

Endorsements are amendments that add or modify the coverage of your policy.

They can either increase or decrease your coverage, depending on your needs and preferences.

For example, you can add an endorsement to cover your home-based business, or to exclude coverage for mold damage.

What discounts are available to me?

There are various discounts that you may qualify for, depending on your insurer and your situation.

Some of the most common discounts are:

1.Bundle discount: If you buy more than one policy from the same insurer, such as home and auto insurance

2.Loyalty discount: If you stay with the same insurer for a long time, usually more than three years

3.Claims-free discount: If you don’t file any claims for a certain period of time, usually more than three years

4.Safety discount: If you install security and safety devices, such as smoke alarms, fire extinguishers, and burglar alarms

5.Age discount: If you are a senior citizen, usually over 55 years old

6.Military discount: If you are a current or former member of the armed forces.

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