Insurance can be tricky and confusing, but knowing whether or not you're underinsured is critical in times of trouble.

The last thing any home or car owner wants to do is have to file a claim and discover that they aren't insured for all the damages that have been incurred. Most policyholders go for the cheaper route thinking that what they have will suffice, but unfortunately, that's not the case.

It's one thing just to get the state's minimum amount of car insurance, but in the event of a major collision with significant property damage or bodily injury, you'll end up paying so much more. If you added in a backyard pool and failed to let your insurance company know, you could face a major loss should someone get injured while swimming. This is a lot to take in, but knowledge is power—and this knowledge will save you money.

What It Means to Be Underinsured for Your Car

wrecked car
Photo by Chris Carter from Pexels

Alright, say you paid for the minimum liability amount for your car and then got into an accident that you caused and now you're being taken to court. If you're being sued for $100,000 due to bodily injury and you only have a $25,000 policy, guess who's paying the remaining $75,000? You are, that's who. 

Auto Insurance Tips:

  • Go beyond the state minimum for liability coverage. In Colorado, it's $25,000 bodily injury per person per accident, $50,000 bodily injury for all persons per accident, and $15,000 property damage liability.

  • Protect yourself against uninsured or underinsured motorists. 

  • Invest in comprehensive coverage. With Colorado's hailstorms and abundance of wildlife, this addition covers damage due to weather and animals.  

Being Underinsured for Your Home

home with tornado damage

If anyone tries to encourage you to pay the bare minimum for home insurance, just run out the door and never look back. Since a home is usually the largest asset you could ever own, investing in an amount at least three times the minimum liability will keep you from financially floundering should damage and repairs outweigh your policy. You may think that this will cost you more, but with a higher deductible, you end up paying less each month. 

Another important thing to bear in mind is what isn't covered should your home require a rebuild after an event such as a fire or tornado. Knowing replacement costs will allow you to grasp the full extent of what compensation is needed from insurance. To assess this value, get in touch with homebuilders and insurance agents in your area and figure out the building cost per square foot and then multiply that by your home’s square footage. You also need to factor in flooring, cabinets, fixtures, roof, exterior work, and other key home features to get an idea of what these repairs will end up costing you.

Homeowner's Insurance Tips:

  • Create an inventory of personal property and take photos.

  • Notify your insurance of any home remodeling or additions.

  • For those at higher elevations, get a special property endorsement if a lightning strike sizzles your connected devices. 

While you may have to invest more in an insurance policy, you'll reap the benefits later on should you be faced with an unsavory event that ends up with you being sued or the damage to your home exceeds your current policy amount. Paying for the "bare minimum" may seem like a monetary convenience, but when you settle for less, that's exactly what you end up getting. 

Want to re-evaluate your coverage or get a second opinion? Request a quote from Howard Insurance Group and see how much coverage you actually have!