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Does your California Home Insurance Cover a Catastrophe?

Does your California Home Insurance Cover a Catastrophe?

The largest asset owned by most people is their home. Homeowners should be aware that there is always a chance that their home could be severely damaged or destroyed by a catastrophic event, such as floods, fires and winds. Most homeowners do buy insurance, but it’s very important to buy adequate California home insurance coverage for a huge loss.

However, homeowner underinsurance remains a sobering reality for many homeowners. Marshall Swift, a company that specializes in providing ways to determine the insurance values of homes nationwide, estimates that more than two-thirds of the homes in the U.S. are significantly underinsured!

Although most homes are owned under mortgages and lenders who require that their properties are insured, the financial institutions’ primary concern is that there is enough coverage to protect the loan value. Homeowners need to make sure that their homeowner’s insurance reflects their property’s full replacement cost. Underinsurance is not normally a problem when a minor loss occurs, but it is an important issue when there is a major loss. If a home is destroyed and the homeowner’s insurance limit did not protect the property’s full value, the difference in coverage has to be handled by the homeowner.

Typically, a homeowner’s insurance policy stipulates the level of coverage that should be carried on a home. Coverage is often increased by a set percentage when a policy renews every year. However, the automatic increase does not necessarily keep pace with economic factors that may raise home replacement costs. An example would be because of the recent catastrophes such as wild fires or floods, construction labor costs are very high, creating an unanticipated repair and rebuilding cost increase. Failure to make sure that insurance coverage is adequate could result in a homeowner having to pay thousands of dollars in uncovered damage.

It is important that homeowners take time to review the type and amount of  their California homeowner’s insurance they carry, from time to time, so that their coverage does not become inadequate as time passes. Checking with your insurance agent is the best way to make sure you are adequately covered for every covered loss!

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