The Newman Blog

What Happens If Your Property Is Underinsured?

scale model of a small house on a table with house key
By:
Aviva Canada
|
Aviva Canada
|
August 11, 2022

Buying house insurance can be an overwhelming idea - especially if you’re new to home ownership. With a variety of coverage options, this can make it difficult to determine what kind of coverage you need.

However, that doesn’t need to be the case.

Buying house insurance is all about having the necessary information on hand. A home inspection survey is helpful to have from your house purchase when researching the right house insurance policy for your needs. It can confirm your electrical, plumbing, age of the roof, square footage of your home etc.

What happens when you’re underinsured?

When you’re underinsured, it means you don’t have sufficient insurance coverage if your house or contents are damaged or lost. Insurance companies typically cover the amount of your claim up to the policy limit you chose at the time of purchase. Selecting a lower level of coverage may save you a few dollars on the policy itself. However, if you’re underinsured, you may not receive the full cost to replace or repair the damages, which may result in out-of-pocket costs. Since insurance companies are only required to pay up to the amount you’re covered for, you can’t claim for more than the coverage you have.

Learning that your insurance policy doesn’t fully cover the damage your property has incurred can be extremely stressful. Working with a licensed insurance representative can help you find the right coverage for your needs.

How to ensure you’re properly insured:

To avoid being underinsured is to be certain that you are appropriately covered for your home and your contents. In doing so, you’ll have peace of mind that should something unexpected happen to your house, such as a fire, it will help lessen any significant burden you might face.  

Here are some things you can do to ensure you have sufficient coverage:

  • Review your house insurance coverage annually with your insurance representative to make sure that you have sufficient coverage based on your current situation.
  • Update your personal property inventory to ensure you’re adequately covered for personal items and belongings.
  • Notify your insurer prior to any changes or renovations to your home. Making improvements to your house can add value, but it can also mean you become underinsured or not covered in the event of a loss.
  • You can also ask your insurance representative about Guaranteed Replacement Cost. It’s an add-on coverage that’ll cover the actual cost of repairs or replacement of your home, even if the costs are greater than the cost to rebuild your home (Note: This is not the same as the market value of your home, which includes the land cost.)

When your home is underinsured:

For many of us, our house is our most valuable asset, so the effects of being underinsured can be significant. Although many household items like photos, heirlooms, and jewellery are irreplaceable, getting appropriate coverage can help to limit the impact of unforeseen damages and help protect you from incurring significant financial losses. Reach out to your licensed insurance broker at Newman Insurance to make sure that you are adequately insured.

The content in this article is for information purposes only and is not intended to be relied upon as professional or expert advice.
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