Your home may be the most valuable asset you ever own. Don’t you want to make sure it is covered properly?
A few tips on what to look for when selecting or reviewing your home insurance policy:
Price isn’t everything: Ask your agent to get the best possible coverage for your money, not necessarily the best price. You have insurance to protect your most valuable asset. When a loss does occur, you won’t be sorry. Keep in mind when determining replacement cost for your home increase of building supplies, etc. Some companies automatically adjust policies for cost of living, but most don’t.
Even so, that may not be enough coverage. You don’t want to be stuck living in a “garage” so to speak, if your home burns down. (Your home is now worth $165,000, but you only have it insured for $100,00) It is good to review your policy with your agent every two years. Also, how is your carrier rated? Are they even rated at all? Rating means they are financially strong and not going anywhere. What a nightmare it would be to have your home destroyed and the company no longer exists! Also, do your research. Does the company hire third-party investigators to try and get out of paying claims? Have they been in company long enough to even establish a claims pool for payouts (7 years is a good rule of thumb)? What are you paying your premiums for-for them to deny you because they didn’t collect enough in premiums? I would actually be afraid if my premiums didn’t go up a little each year. At least I know my company is paying out on claims! Would if you had to go to court (ex. arson) does is your company going to be there to defend you or do you have to find your own attorney? Also, as with companies, not all policies are created equal. Not at all as a matter of fact! If your home burns down, does your company pay for debris removal, or take it off the value to replace your home? Hmm. Bet you didn’t think of that, did you? A tree falls on your property, does your policy cover the cost to remove it? Does your policy cover the expense of the fire department coming?
Actual cash value” vs. replacement cost. If you have a policy that pays out “actual cash value” on your home’s contents, for example, you’ll get a check for what your possessions were worth when they were destroyed – not what they would cost to replace. This is a HUGE issue! Say you own an older television set. It gets destroyed from fire. Guess what? If you have a policy with actual cash value, say goodbye to a new tv! It has depreciated in value so much its worth almost nothing.
It’s much better to spring for “replacement cost” on your contents, and get a check for what you would need to buy a new item. The cost of this coverage is typically about 10% to 20% more than actual-cash-value coverage.
Check your “loss of use.” Homeowners policies typically provide money to pay your rent and related living expenses while your home is being fixed. If the living expenses are not enough for you and your family to live on while you are waiting for your home to be habitable, ask your agent to increase coverage.
Liability Issues: Liability coverage protects you from lawsuits. Chances are pretty good you don’t have enough protection, which means you could be in danger of losing everything you own to the next person who decides to sue.
Deciding how much liability to buy is tough. You can’t predict who is going to sue you or for how much. Especially now during hard economic times. People tend to get “sue happy”. You can never have enough liability coverage. If you have something to lose, you have something to protect. Isn’t it sad how little a million dollars is today? Anything over and above your policy limits are YOUR responsibility (this includes court costs) You may also want to talk to your agent in regards to increasing your liability with a personal umbrella policy. Also remember you can’t sue yourselves! I know if you are working on your roof and fall and hurt yourself its tempting to get money from your home policy. No, sorry. Now, if a friend was helping you and falls off, that is whole other issue. Remember to always hire professionally insured contractors to perform work on your homes please!
Endorsements: If you own something truly valuable, chances are good your policy restricts how big a check you’d get. Most policies put payout limits of $1,000 to $2,500 on such items as jewelry, firearms, artwork and antiques. If you want full coverage (i.e. it will be replaced if you lose a stone or lose the whole item entirely,where as otherwise it wouldn’t be) you need to purchase a “floater” or “rider” on the item at an added cost. Also, does your policy cover back up of sewer or drain coverage? If not, this should be added on to your policy. Did you also know some companies offer an identity theft endorsement?
A good insurance agent is there to educate you and ask you the proper questions to make sure you are protected and all of your needs are being met.