Bernice Ross
It’s the beginning of the year and now is an excellent time to review your home and auto coverage. Calamity can hit at any time, whether it’s by Mother Nature, a broken pipe inside a wall or some other disaster. The question even real estate professions need to answer is whether you have the necessary insurance coverage to protect your property.
Many people believe that their homeowner’s insurance policy provides protection against most disasters. Sadly, most don’t discover there is an issue with their policy until they have a major claim.
In order to protect your home, the first question you must address is whether you have the right type of coverage for the risks in your area. The second issue is whether you have the appropriate amounts to cover any losses that you may incur.
Some Risks Require Extra Coverage
If you have jewelry, computers, artwork and other valuables that exceed your basic policy limits, you will need a special rider to cover those items. The same is true when it comes to insuring for earthquakes, floods and hurricanes.
For example, assume that there is a major earthquake in your area. During the quake, your next-door neighbor’s gas line breaks. Both of your homes burn down. In this case, your fire insurance policy would not cover your loss because an earthquake was responsible for the fire. To be covered, you would have needed a separate earthquake policy.
Most home insurance policies cover water damage. The challenge is that if the damage comes from the ground up (i.e., from a flood), it is not covered unless you have flood insurance. To determine whether your property is in a flood plain, visit the FEMA website. You will also find a wealth of information about what is available on a federal level to protect your property.
You’ll also need to make sure you don’t overpay.
Many lenders will automatically ask you to insure your property for an amount equal to the loan amount. In many places in the country, the loan amount is significantly higher than the replacement value of the improvements. Carrying “extra” coverage is a waste of money. On the other hand, if you have an older home, be careful about not having adequate coverage in today’s market.
And make sure that your insurance policy covers “full replacement value.” Some policies only reimburse you for the “depreciated” value of your appliances and other household items. Also, make sure that your policy provides for replacement with the same quality. You don’t want a $2,500 stove to replace your $15,000 top-of-the-line range. Check with your insurance agent to make sure these provisions are in your current policy.
Document Your Home Today
Take pictures of as much of your house as possible. Include both the inside and the outside. For example, after the 1994 Northridge earthquake, my insurance carrier claimed that some of the cracks in my stucco were there prior to the quake.
Fortunately, I had pictures to support my claim. Many people overlook artwork, silver, china, clothing and other items. Store your pictures and videos in a safe place away from your property. A smart move is to back them up using a computer backup system as well as backing them up on a separate backup drive in a safe deposit box or fireproof box.
Also, make sure your home meets the insurance company’s requirements
People sometimes forget to maintain their fire extinguishers and smoke detectors as required by their homeowner’s policy. Failure to have these protective devices in good working order could result in denial of your claim.
You might also consider purchasing an “umbrella policy.” These policies provide extra liability coverage from both auto accidents as well as for your home. For example, my mother slipped and broke her hip in front of my house. My umbrella coverage covered 100 percent of her medical costs plus providing an additional settlement.
If you have questions about your current coverage, speak to your insurance professional. Also, it’s smart to shop insurance companies and compare costs and levels of coverage. In addition, be sure to also search which companies are currently being ranked the worst. Taking a bit of time now to take these steps can not only save you money, but make it easier to collect a claim if you need to.
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
