A Primer on Home Owners Insurance in the Storm

Hurricane Florence made landfall and continues to wreak havoc on the East Coast as the storm displaces thousands and thousands of families.

Learning about the death and destruction in the storm’s wake isn’t easy and my heart goes out to all of those affected.

We don’t like to think about natural disasters, but they are a fact of life. At the first mention of a hurricane, the East Coast springs to action to prepare. Sand bags are filled and homes are stocked with the requisite canned goods, bottled water and batteries.

Why does hurricane preparedness stop at ply wood and gassing up the cars? I’m talking about how we can financially prepare ourselves for when disaster strikes.

Let’s talk about Florence and the mayhem she’s brought to the Southeast and how you can best prepare for the unexpected.

In the wake of the storm, thousands of homeowners insurance claims will be filed in the Southeast. Sadly, not everyone’s claim will be fully funded. Here’s why:

If you own a home, you have homeowners insurance. You likely selected a policy when you purchased your home, didn’t commit the details to memory and never gave it much afterthought.

When I onboard new clients, an item on the agenda is to discuss insurance and role it plays in your overall financial stability. Some clients are so disinterested by the topic of insurance, they suggest skipping the topic altogether.

Having the right insurance in place can be transformative

That’s always my cue to inform them that you could do the best job, investing, saving and planning, but if you don’t have the protection piece solidified, a surprise could really change the course of your future. (And this isn’t coming from someone who’s trying to sell you insurance— our firm doesn’t do that.) I’ll urge you to have the insurance conversation to ensure your financial dreams stay on track.  

A primer on insurance

There are two main kinds of insurance:

  • Replacement value: You likely have this. Should a natural disaster strike or a catastrophe fall upon your house, your insurance policy would be required to replace what was lost. But there are times when this fixed policy might not work out to your advantage.

    • Example: Your home would cost $200,000 to rebuild, but tomorrow you could sell it for $300,000 because it has appreciated in value.

  • Market or cash value: This policy is definitely more of a gamble because as its name implies, it’s market based. More importantly, the market based value of your home extends to everything inside of your home at the time of the claim.

    • Go in knowing that there’s variability. Should a sudden market drop happen around the same time of your claim, it doesn’t look good for you.

Check your policy today!

If you discover you have a market value policy, I would very concerned. However, not all market value policies are created equal and depending on your circumstances, it could make sense for you.

Take it from me: swallow your pride


When I was a newlywed, new father, new homeowner and newly minted college grad in my early-20s, my family and I were lovingly restoring our first home a house in Indiana from 1890. One phone call changed our lives and suddenly we were moving to Atlanta because I was offered a job as a youth pastor. We put our home on the market and were ready to make the move.

The day we were going to pile into the car and head to Georgia, the furnace blew. My family and I stayed the course and drove south, while I called a repair crew over to the house. By the time the repair crew came a few days later, the brutal Indiana winter got the best of the old house and the pipes froze. The repairmen fixed the furnace, but as the pipes thawed in our abandoned house— they burst! Water poured down from the ceiling and it wasn’t until a neighbor swung by that anyone knew of the epic flood raging in our home.

With our homeowners insurance replacement policy, the insurance adjusters came out and started to assess the damage. I didn’t do my homework because after our insurance provider inventoried the damage, I learned we were going to receive a check for half of the replacement value, then we had to repurchase each item and then we’d receive the other half of the check.

I understand that the method is one way to prevent insurance fraud, but I was getting hosed. I was 23-years-old and living on a meager salary— I didn’t have the money to front for the item replacement and my ego got in the way of asking my family for a short term loan. Suffice it to say, the insurance company made some good coin off of my wife and I that year.

fool me once…

I grew wiser from that experience and some years later, I was in the market for another homeowners insurance policy. The agent I worked with got a little crafty and incorporated an electronics rider to be insured under the homeowner policy at just $3 extra a month.

Over the course of that policy, I used it to file one legitimate home claim, a computer replacement and a phone replacement. I thought my agent was brilliant and his rider idea saved me thousands.

Lo and behold, I received a letter in the mail that the insurance company was dropping us because there were too many claims. In the eyes of the insurer, the $50 cell phone claim was no different than a $50,000 fire damage claim.

With this blemish on our record, I was viewed as a flight risk to other carriers who wanted me to pay more in monthly premiums because I had too many claims.

Learn from my stupidity: only use your policy for major things.

Take ten minutes and read through your policy. If it’s not clear, call your agent and have them talk you through it in plain English. Understanding your policy is truly a game changer in your long term success.

Hot Tip!

Take a tour of your house using your smartphone camera. Photograph everything from the appliances and furniture to the contents of your closets and kitchen cabinets to have a record of proof should anything need repair or replacement.

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