The risks of underinsurance
Underinsurance is when you don’t have enough insurance to completely replace your home and belongings if they were completely destroyed. For example, if you have your home insured for $1 million but it’s really worth $2 million, you’d be out-of-pocket $1 million if a fire completely destroyed your house.
You can avoid underinsurance by insuring your home for its entire value rather than insuring it for less just to save on your monthly premium. You should also get your home appraised regularly or after a renovation and adjust your insurance based on any increase or decrease in your home’s value.