Being underinsured may force individuals to pay significant out-of-pocket costs when disaster strikes

Being underinsured means that your insurance policy doesn’t cover the full value of the item you’re insuring– and that can leave you in a sticky situation if you’ve experienced a serious accident, injury, or other disaster. Despite the risks of underinsurance, millions of drivers, homeowners, and other individuals have a serious gap in their insurance coverage. While this may allow them to save money in the short run, it can lead to real problems down the line.

That’s why you should always make sure you’re fully insured before disaster strikes. Waiting too long to get fully insured could lead to a series of dilemmas that could seriously impact you and your family’s physical, mental, and emotional health in times of crisis.

Statistics indicate that more than two out of three homeowners are seriously underinsured

Statistics from Nationwide indicate that more than 66% of American homeowners are currently underinsured– with the average rate of underinsurance being more than 20%. That means that if a $200,000 home is destroyed, the average homeowner would be responsible for paying more than $40,000 of damages out-out-pocket. Unfortunately, the majority of homeowners don’t have enough savings on hand to pay tens of thousands of dollars to replace or rebuild a badly damaged home. In addition, uninsured (or underinsured) homeowners will also have to consider the fact that they’re still responsible for paying the mortgage of their now-unlivable home, which can put an incredible financial strain on almost any family.

Smart homeowners also make sure reconstruction costs, improvements, and personal possessions are also covered by their insurance policies

In many cases, the cost of rebuilding a home may exceed the home’s sale value, so it’s essential to make sure that your insurance policy covers the costs of a full or partial rebuild in the case of an accident or natural disaster. Rebuilds and repairs can often be much more expensive than owners anticipate, for a variety of reasons, including the difficulty of finding a qualified rebuild or restoration contractor, an increase in the price of building materials, and other costs.

Many homeowners’ insurance policies do not cover the costs of personal possessions. For some families, the possessions they keep in their home may represent a considerable fraction of their net worth, especially if they have a large collection of jewelry, antiques, or priceless collectibles. However, even if your family has nothing other than standard furniture and appliances, fully replacing these can still cost tens of thousands of dollars– a huge financial burden to deal with, especially if you can no longer live in your home.

Drivers also need to take careful steps to avoid being underinsured

While each state has a minimum amount that each driver must legally be insured up to in order to drive, smart drivers like to make sure that their insurance policies significantly exceed that amount. Often, this required minimum amount is between $20,000 and $25,000 for each individual and between $40,000 and $50,000 per incident. These coverage amounts mean that drivers who injure another person on the road could be liable for a large amount of the victim’s medical bills if they exceed the driver’s insurance coverage.

In Florida, the required coverage amount for bodily injury is only $10,000. This means that while millions of Florida drivers are ‘fully insured’ per the law, many of them may still be forced to pay huge out-of-pocket costs in the case of a serious accident. Drivers in Florida and other states also need to protect themselves against uninsured drivers; more than 10% of drivers across the U.S. have no auto insurance– and about 20% of drivers in Florida are completely uninsured.

As with other insurance dilemmas, do your homework and ask questions to make sure you aren’t underinsured

Being underinsured is something most people never think about until they’re forced to by an accident, injury, or serious disaster. Instead of finding out after the fact that your insurance coverage isn’t up to par, take steps to make sure that you and your family are completely covered. Doing so won’t just save you time and money; it’ll also give you serious peace of mind.

To learn more about how to make your insurance policies work for you and your family, contact Avante Insurance today for a free consultation.