Study: Many Wisconsin homes underinsured

Posted at 10:28 PM, Dec 12, 2017
and last updated 2017-12-13 08:43:40-05

Fires, floods, tornadoes.  Mother nature has not been kind to homeowners this year. And many are finding out, after a disaster, they don't have enough insurance coverage.   The I-Team discovered Wisconsin ranked high when it comes to the number of U.S. homes that are under-protected.

New data shows 60 percent of American homes are underinsured. Meaning even if you settle a claim, you could be tens of thousands of dollars short if you have to rebuild.  Experts say homeowners should dust off their policies and start asking some questions.  

Last summer, as water was pouring into people's homes in Southeast Wisconsin, Lynn and Joe Tyson were out of town. 

"There was flooding in the yard, but we're up on a hill so we thought we were ok," Lynn said.

 When they got back it looked like their Burlington home had weathered the flood, until they tried to open a door to get inside.

 "We couldn't open it," Lynn said.  

Then they noticed the sidewalk.  

"Different chunks of concrete there were tipped up," Lynn said, showing us pictures.  "We saw that it had separated away from the garage, separated away from the house."

Water soaked the rug in the basement, left them with mold and shifted the Tyson's foundation more than 2 inches.  Their home is just outside the flood plain, and they've never had problems before. So they only have a homeowners policy.

"I, like a lot of people, thought that insurance would cover something.  Turns out, no," Lynn said.

The Tyson's know things could have been much worse.  Their sump pump didn't give out.  They discovered if it had, coverage for sump pump failure is an add-on policy.  

A California based data and analytics company found almost 60 percent of U.S. homes are underinsured.

"They don't have the coverage they thought they had," CoreLogic's Susan Williams said.  

She told us if you're underinsured by less than 20 percent your carrier will usually make up the difference.  But if it's more, and your home is destroyed in a disaster, the cost to a homeowner to rebuild can be massive.  

"They would actually end up being responsible for the amount they were underinsured by," Williams shared.

If it costs $300,000 to rebuild your home, but your coverage is only for $237,000 that $63,000 difference would have to be paid, out of pocket.  Williams advised consumers make sure their policy is based on a reconstruction cost estimate, not market value, "you actually know what it's going to cost to rebuild the home in case of a total loss."

Wisconsin is in the top 20 when it comes to the number of homes underinsured by more than 20%. West Virginia ranks number one.

As soon as the damage to their home is fixed the Tyson's plan to take a hard look at their insurance policy.  

"What exactly do we have, what can I get that will help us in the future," Lynn said.

The Tyson's total cost to fix the damage was around $20,000.  They borrowed money from their life insurance to pay it down and got a small grant from the community.  They just learned the $10,000 they were still on the hook for, has been covered.  A check from the Burlington Community Fund and Love Inc. just came in the mail. 

If you are underinsured, CoreLogic found that can also impact any claim a homeowner makes.  It doesn't just apply to a total loss. 

To make sure you have enough coverage:

  • Your policy should be based on a reconstruction cost estimate not your home's market value or current mortgage.
  • If you've had the same policy for years, it's recommended you update the estimate.
  • Also be sure to update your policy if you've added on to or made upgrades to your home.