When you think about it, is there anything else in life that you buy (reluctantly) and hope you never use? Insurance is funny like that. What if you could see the true value of homeowners insurance (before a loss)? Many folks pay their homeowners insurance by virtue of escrow. That is, every month when you pay for your mortgage, you’re paying for your home insurance too.
Out of sight, out of mind. Unlike a pesky monthly bill.
And if you have a loan on your house, I imagine the bank is requiring you to carry insurance for the remainder of your loan.
A few people reading this have a smirk on their face thinking “our home is paid off!”. If that’s you, give yourself a pat on the back. That’s an accomplishment!
Yet for the rest of us, we have an obligation to protect this structure that keeps us warm and dry.
If you didn’t owe anything on your home would you cancel your insurance?
By the Numbers
Each year you receive a stack of papers from your insurance company. Your eyes are directed first towards the premium. Then you review the rest of the documents. Not long after, your eyes glaze over and you file them away. Never to be seen again.
So what are you getting for that large premium your mortgage company pays without a beat?
Let’s take a look at a real life example of a homeowners insurance policy located in Platte City our office wrote in the summer of 2016. The following numbers were taken from their Declarations Page:
Other Structures: $30,200
Personal Property: $211,400
Pretty straight forward, right?
If you were to add up the three coverages from above it brings you to a total of $543,600.
That means if they lost their house, detached building, and all of their personal belongings their insurance company would pay them up to $543,600 (minus their deductible of course) to rebuild and make them whole again.
This family pays $2,177 per year in home insurance.
That means it would take them over 249 years of annual premiums to pay for those three items of protection.
That doesn’t even include the following coverage’s that automatically come with their policy:
Loss of Use: $90,600
Personal Liability: $500,000
Medical Payments: $1,000
When you consider everything you get with a homeowners insurance policy, where else do you get this kind of value?