One of the painful aftermaths of fires and tornadoes that decimate homes may be the crushing realization that the home is dramatically underinsured. According to one of the largest residential building cost data companies, Marshall & Swift/Boeckh, 64 percent of U.S. homes are undervalued by an average of 19 percent. If this figure is applied to a home with a replacement cost of $400,000, it might be insured for only $324,000, a shortfall of $76,000.
This underinsurance results in a potentially huge coverage gap, particularly if the home is not insured with a guaranteed replacement cost provision. A survey by United Policyholders, a consumer advocacy group, said 75 percent of California home owners affected by the 2007 San Diego wildfires were underinsured by an average of $240,000.
Here are some general tips to consider to reduce the likelihood of your home being underinsured:
Source: Copyright 2012, International Risk Management Institute, Inc.
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