Could You Afford a $12,000 Emergency?

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Why you should care

Because nothing throws your financial plans off track like a home emergency.

Elizabeth Johnson thought she and her husband were doing everything right for the home they had lived in for 12 years — until a tree fell on her roof within 1 foot of the house’s main support beam. “We previously had arborists out to examine the tree to make sure that it was healthy and not a risk, since our back porch was built around it. It didn’t show any signs of being sick or dying,” says Johnson, a 36-year-old educator in Atlanta.

Despite the tree’s supposedly clean bill of health, it split and fell. Johnson suspects that one of the two main trunks, which were shaped like a Y, had gotten much heavier than the other, causing it to fall. Johnson and her family were home at the time, but thankfully no one was injured — and their insurance covered most of the repairs after they paid their deductible.

The Johnsons were lucky that they had home insurance — but most people aren’t so prepared. In fact:

60 percent of the country is not adequately covered when it comes to home or renters insurance.

That’s according to a 2018 survey by the Insurance Information Institute. And when disaster strikes, it strikes big. The average homeowners insurance claim hovers just above $12,000. And if you rent, you may also be vulnerable: While landlords have insurance, the insurance covers the building — not any of your personal belongings. Renter’s insurance may also also protect you from personal liability if someone were to, say, slip and fall on your property.

But home insurance doesn’t cover everything. That’s why it’s important to understand exactly what is — and isn’t — covered and have a home maintenance plan in place to cover potential emergencies that fall outside coverage. For example, Alissa Bader, 37, a technical writer in Denver, had been in her house for just four months when major rainstorms caused her basement to flood. At 11 pm one night, she went downstairs and wondered why the carpet was squishy, only to discover 2 inches of water, mainly concentrated in one room of the basement.

They shut off the electricity and, using flashlights, moved everything to a dry corner. The next day Bader and her husband hired a carpet cleaning company — a $3,000 expense — that sucked up the water and put in a giant fan to dry out the basement. They had to drill holes in the drywall to speed up the process.

Bader later learned that the home, which was built in 1955 and rehabbed in 2009, had gutters that were loaded with leaves, which caused the flooding. The issue hadn’t come up in their inspection. During the repair, she learned that her gutters needed to be cleaned twice a year; since doing so, she hasn’t faced another incident. She’s more than happy to pay for that, since it helps her save in the long run. In retrospect, Bader wishes she had known to inspect the gutters prior to moving into their home.

In general, anticipating problems before they arise is smart, says home safety expert Debra Holtzman. One key step in “adulting” your home, she explains, is to install smoke alarms, since they reduce your family’s chances of dying in a fire by half, or opt for an automatic fire sprinkler system. Holtzman also suggests installing a carbon monoxide alarm in every sleeping area of the home. Smart home devices and technology can also help protect your home. For example, sensors can be installed to monitor things like humidity and air quality as well as potential problems like leaks or fire. These systems can sync to your smart phone so you can have peace of mind and nip potential issues in the bud. Some insurance companies even offer policy savings as a reward for having smart home tech.

It’s also essential to take the time to make note of small repairs and to-dos before they cause issues. For example, Carrie McIlveen, a marketing manager in her mid-40s in Newcastle, Washington, decided to go on a house-fixing spree in the two weeks she had between ending one job and starting another. During this period, McIlveen made a point to have her furnace maintenanced and replaced her refrigerator and dishwasher.

Depending on your homeowners insurance policy, it may be possible to purchase additional coverage, such as equipment breakdown coverage, that can help cover the cost of equipment repair and replacement. Reading over your insurance policy and asking any questions can help you understand how your coverage works and how it may assist you in case of an emergency. For example, many policies offer temporary living expenses to cover food and lodging if your home was unlivable for a period of time during necessary repairs.

Whether you’re buying or renting, it’s essential to pay attention to any quirks you may see in your home — even if they seem minor. It’s also a good idea to make sure you understand how you’re covered and consider reviewing your policy once a year. Shopping for a policy? Talking through options, asking questions, and having a clear understanding of the coverage you need can make it seamless to have a policy crafted exactly for the needs of you and your family. While it may not be as fun as Pinterest-worthy decorating — and it will likely never be the topic of a home improvement show on cable — preparedness is key to making sure your home is ready for real life.

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