Insurance can feel straightforward, until you actually have to file a claim. Many homeowners and drivers assume they’re fully protected, only to discover coverage gaps when it’s too late.
To help break down some of the most common misconceptions and explain why regular policy reviews matter, we sat down with Chris Walton, Agency Manager at Cornerstone Insurance Agency LLC for an in-depth conversation about underinsurance, rising costs, and how families can better protect themselves.
Questions? Reach out to one of our knowledgeable insurance agents. We’re eager to set you up with the right coverage and rate!
What does it actually mean to be underinsured?
Chris W: Being underinsured means you don’t have enough insurance coverage in your policy to fully protect against financial loss. When a claim happens, your insurance payout may fall short of the actual cost to repair, rebuild, or replace what was lost, leaving you responsible for paying the difference out of pocket.
Why do so many homeowners and drivers discover coverage gaps only after filing a claim?
Chris W: Most people don’t read their insurance policies in detail or fully understand what is and isn’t covered. Home, auto, and commercial policies are full of exclusions, limits, and conditions that often don’t become obvious until a loss occurs.
Unfortunately, the claims process is often the first time those gaps are exposed, leaving homeowners or drivers surprised by what their policy doesn’t cover.
What are the most common misconceptions people have about their insurance policies?
Chris W: One of the biggest misconceptions in auto insurance is the phrase “full coverage.” Many people assume that means they’re protected against everything, but in reality, “full coverage” doesn’t have a universal definition in the insurance industry.
On the homeowner side, people often assume:
- Their home is insured for what they paid for it
- Their policy automatically includes inflation protection
- All water damage is covered
However, home insurance is typically based on reconstruction costs, not market value. Not every carrier automatically includes inflation protection, and flood damage is excluded from standard homeowner policies and requires separate coverage.
These misunderstandings can create major financial exposure for consumers.
How often should someone review their insurance coverage?
Chris W: At a minimum, homeowners and drivers should review their policies once a year.
Even if you have an auto policy that renews every six months, an annual review is usually enough to ensure your coverage still matches your needs. Regular reviews help account for:
- Home improvements or renovations
- Rising property values and inflation
- Changes in personal circumstances
- New assets or liabilities
Keeping policies updated ensures your protection keeps pace with your life.
What major life changes should trigger a policy review?
Chris W: Several life events should prompt a conversation with your insurance agent, including:
- Buying or selling a home
- Renovations or additions to your home
- Purchasing high-value items like jewelry or artwork
- Marriage or divorce
- Starting a home-based business
- Having children
- Significant increases in income or investments
- Buying a new vehicle
For example, upgrading from an older vehicle to a newer or more expensive car may require higher property damage limits. Similarly, as your income and assets grow, an umbrella policy can help provide additional liability protection.
Are rising home values and inflation affecting how much coverage people need today?
Chris W: Absolutely.
Construction costs, labor, and materials have all increased significantly in recent years. Many homeowners are now unintentionally underinsured because their policies haven’t kept pace with rising rebuilding costs.
Labor shortages and higher material prices mean it could cost substantially more to rebuild a home today than it did just a few years ago. Without updated coverage limits, homeowners may not have enough protection to fully rebuild after a major loss.
What are some examples of situations where clients thought they were covered — but weren’t?
Chris W: Flooding and sewer backup are common examples.
Some real-life examples involve a homeowner whose sprinkler line broke outside the home, filling a window well with water. The pressure eventually broke the basement window and flooded the basement.
Although it wasn’t a large-scale natural disaster, the insurance company classified it as a flood because the water originated outside the home and entered through the foundation. The homeowner assumed the damage would be covered under their standard homeowner policy, but flood damage is excluded.
Another commonly misunderstood coverage is ordinance or law coverage, which helps pay for upgrades needed to bring a damaged home up to current building codes during repairs.
What areas of a policy do people tend to overlook the most?
Chris W: Deductibles are one of the most overlooked parts of an insurance policy.
Many people focus only on lowering their premium and may choose a higher deductible without fully understanding the financial responsibility that comes with it.
For example, a 5% deductible on a $400,000 home could mean paying $20,000 out of pocket before insurance coverage begins.
People also frequently overlook:
- Policy exclusions
- Endorsements
- Water damage limitations
- Additional optional coverages
Understanding what is included, and excluded, is critical.
What can families do now to avoid surprises during the claims process?
Chris W: I recommend a few proactive steps:
- Review your policy annually
- Make sure all information is accurate and up to date.
Ask “what if” questions
Discuss potential scenarios with your insurance agent and your family. Understanding how your policy would respond during a hurricane, tornado, fire, or major accident can help eliminate surprises later.
Keep a home inventory
Once moved into a new home, homeowners should walk through each room with their phone, taking photos or videos of belongings. This documentation can be invaluable after theft, fire, or catastrophic damage.
Consider umbrella insurance
As income and assets grow, umbrella insurance provides an extra layer of liability protection to help safeguard everything you’ve worked hard to build.
What advice would you give someone who hasn’t reviewed their insurance in years?
Chris W: Don’t wait until a claim happens.
Coverage that made sense five years ago may no longer adequately protect you today. A simple 20–30-minute conversation with an insurance professional can help uncover coverage gaps, improve protection, and ensure your policy reflects your current lifestyle and financial situation.
Many people assume updating their policy will dramatically increase costs, but often the increase is minimal compared to the additional protection gained.
“Just like you’d see a financial advisor for a financial checkup, come see us for an insurance checkup.”
Taking time each year to review your coverage, ask questions, and understand your policy can help prevent costly surprises when you need protection the most. Call our agents at Cornerstone Insurance Agency LLC to learn more.
This article is for informational purposes only. You should not act based on this information without first consulting with your insurance agent; if you would like a quote from a Cornerstone Insurance Agency licensed agent, contact us. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided “as is.” Cornerstone makes no representation that this content is error-free.