5.27.25
Would Your Homeowners Insurance Cover a Major Event?
After recent storms, some homeowners discovered they’re underinsured. Does your coverage need an increase?
Recent tornadoes and straight-line winds left hundreds of thousands of Michigan residents without power, dozens of homes damaged and numerous trees toppled. Destruction that happens in minutes and can take days, weeks or even months to repair and cost thousands of dollars. While most homeowners turn to their insurer to help cover the costs of restoration, some folks find out they’re underinsured. “[O]nly 33% of homeowners are ‘very sure’ their policy’s dwelling coverage limits are high enough to cover the cost to rebuild their home if it’s destroyed,” says Policygenius. If you’re not sure you have enough homeowners insurance coverage, keep reading.
Why homeowners insurance coverage may be too low
It’s easy to automatically renew a policy without increasing coverage. This is especially so when premiums go up, like the 14% increase Michiganders saw in 2024. However, not increasing coverage periodically could leave you with inadequate coverage. A primary reason is the ever-increasing cost of building supplies and labor.
Mistakes in determining homeowners coverage
When choosing coverage levels people often mistake market value for replacement value. However, replacement value might be higher or lower than market value. For example, rebuilding to align with the latest building codes could make replacement value higher. Replacement value could be lower than market value if the land itself is highly valued.
Another mistake is planning on rebuilding costs to equal new construction costs. In practice, it may cost up to 40% more for reconstruction. This is due to added costs for things like debris removal and expertise in restoration. Builders of new homes keep costs lower through economies of scale and building to plan. The process is also streamlined. Reconstruction requires a one-off approach to make sure the end result is structurally sound and the new finishes match the existing ones. It often costs more than new construction.
How to get the right amount of homeowners coverage
There are three tools you can use to determine how much homeowners insurance coverage you should have:
- Hire a professional home appraiser who is familiar with your area and local building costs
- Use an online calculator
- Ask your insurance company for an estimate
The simplest way for most people to get a home replacement estimate is by talking with their insurance representative.
Also, to help lower your homeowners insurance, ask about any available discounts for bundling policies (like home and auto) and if you qualify for any groups that receive discounts (like retirees or military). As a Consumers member, you can save with a group insurance discount through our partner, Nulty Insurance.
Another potential way to reduce the premium for homeowners insurance is to increase the deductible. Analysis by Insurance.com shows that, on average, a Michigan policy with $300,000 in dwelling coverage and $100,000 will save $719 with a $5,000 deductible.
When to evaluate your homeowners coverage
It’s a good idea to review your coverages at least once a year. Many people do this at renewal time (and also comparison shop to see what other insurers offer). If it’s been more than one year since the last review of your homeowner’s policy limits, we encourage you to do so right away. A ten- to fifteen-minute phone call with your insurer can help ensure you’re fully covered before the next storm or mishap hits.
All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.
