By Mark Fraser
A recent report from CNBC found that the average American has a staggering $90,460 of debt, with Millennials and Gen X averaging $78,396 and $135,841, respectively. Overall, consumer debt in the United States is over $14 trillion, a figure likely to continue to spike in an environment of inflation and economic uncertainty.
Debt impacts most American households. While budgeting plans and paydown strategies can be effective when things go as planned, they can quickly be disrupted or completely derailed when the unexpected happens to your home and property. Without proper insurance protection, you can go from a manageable debt situation to a life-altering financial crisis in an instance. Knowing what’s at stake, homeowners insurance should be at the core of your comprehensive debt management strategy.
Plan for proper insurance coverage on your home and the assets inside.
As families and individuals grow their wealth and accumulate new assets, they often neglect doing a full review of their homeowners insurance and related policies to make sure they are still adequately covered. They’ll renew the same policies year-over-year without fully understanding if they are still the best option. This can be hugely problematic and open the door to unnecessary risk that can lead a family further into debt.
Review your coverage. Many people incorrectly assume that everything in their home is covered under their homeowners insurance policy. Often, a separate policy is needed to cover valuable articles, such as an art or wine collection – or jewelry. If those items lost or damaged and they aren’t properly covered, it could create a hefty financial burden to replace them.
Look for gaps in protection. An umbrella policy covering excess liability is another way to protect against unexpected financial consequences which could lead to huge debt. There are limits to how much liability coverage people have in their home and auto policies, so those with a significant amount of assets who do not have an umbrella policy can have huge exposure.
Check your home’s current value. Examine whether you are underinsured on the replacement cost of your homeowners policy. It is common for families and individuals to have existing policies that have not properly accounted for the increased value of their homes over time. And in some cases, others simply go with policies that they knew would not cover the full replacement costs of their homes. While this might seem like an easy way to save a few dollars in premiums, it could lead to massive debt and financial devastation should something catastrophic happen to your home.
People spend years accumulating wealth, building their homes, enhancing their lifestyles and creating a future only for it to be wiped out quickly if they are not fully protected from the unexpected. Part of financial responsibility is as simple as reviewing your current homeowners insurance and allowing an expert advisor to guide you in creating a coverage plan that will safeguard your future. Umbrella insurance coverage is a simple and inexpensive way to broaden your coverage and create an additional layer of protection providing financial security against those unknown or unexpected risks.
Not knowing if your home is underinsured could mean incurring massive debt to cover damage costs. Speaking with an experienced insurance advisor who understands your risks and can identify the gaps in your coverage can protect you from incurring unexpected debt and provide a sense of security and peace of mind into the future.
Mark Fraser is CEO at National Advisors Group, a national, independent insurance agency and leader in insurance technology and innovation. To learn more about National Advisors Group, visit nationaladvisorsgroup.com.