Reduce Out-of-Pocket Expense, Increase Support and Guidance
What if your home literally goes up in smoke or incurs major damage from flood waters, hurricane winds, tornadoes, ice storms or other disasters? Where do you turn if an intruder carts off your most valuable possessions, and even some not so valuable but sentimental to you?
Homeowners insurance is your safety net, but there are different levels to consider under this umbrella.
It may seem expensive – especially flood insurance, but it’s an essential protection, like medical, automobile, and life insurance. Certainly, if something goes awry, you’ll probably kick yourself for not purchasing it. Replacing an entire home or parts – a kitchen or bathroom – far exceeds the cost of your insurance premium.
Here are 10 issues that need to be addressed when you consult with an insurance professional:
- What will be the amount of the premium, so I know what I will pay monthly and annually for the policy? Oftentimes, this is included with your monthly mortgage payment, if you have an escrow account.
- Does the size of my house, the neighborhood, the building materials used (i.e. frame or brick), or the age of the dwelling affect the cost?
- What exactly does the policy cover – my home, detached structures, landscaping, valuables, and liability for accidents on my property?
- How much of a discount will I get if I have dead-bolt locks, a security system, smoke detectors, fire extinguishers, sprinkler system, and other safety features?
- What is the required deductible if I file a claim?
- How long will the policy last and will it be re-assessed annually?
- Will I get a better discount if I buy my home insurance from the same company that carries my car insurance?
- What will the policy exclude, if anything, such as sewer backups, or flooding?
- How difficult will it be to cancel my policy once I purchase it, for whatever reason?
- How easy is it for the insurance company to cancel my policy, if, for example, I file too many small or large claims? And how many am I permitted?
With your list of questions in hand, an updated list of the value of your home and its contents–including furnishings, jewelry, any special collectibles all based on recent appraisal values, interview at least three potential insurance companies or independent agents. You can buy from a direct underwriter, or an agent of an underwriting company, or you can go to an independent agency who represents several insurance companies.
You’ll want to hear what they suggest and be sure you compare apples to apples – coverage, costs, deductibles and limitations. You’ll also want to review the additional insurance topics listed below, to be sure you’re fully protected:
Liability insurance: This is important if someone falls or is hurt on your property, as that person may file a lawsuit against you for medical and legal bills. This may be a matter of a few hundred dollars, but could be thousands upon thousands, and the total loss could wipe you out financially. "Umbrella and personal excess insurance policies, which are synonymous, are over and above the basic liability, and serve as a safety net of $1 million to $100 million (or more), depending upon one’s net worth," explains Bryan Gold, principle of Gold Insurance Group, LLC, St. Louis.
Flood insurance: If your house is located in a Flood Hazard Area http://www.fema.gov/special-flood-hazard-area, you’ll need flood insurance, and it’s required if you have a mortgage from a federally regulated or federally insured lender. Even if you don’t live in a flood hazard area, you may want to purchase flood insurance as a precaution. We’ve all seen the national news stories in recent years, how flooding can occur almost anywhere at any time.
Replacement cost or actual cash value: This is an important topic to discuss since the depreciated (cash) value of a property varies considerably from replacement value. It’s best to obtain replacement coverage as this means your insurance will replace losses at today’s market value. Most lenders require replacement coverage, or at minimum coverage required to replace the dwelling and other structures considered in the appraisal of the collateral pledged as security for the loan.
Riders: If you have valuable jewelry, antiques, or other collectibles, you may want to buy a rider or personal articles floater to cover these items separately. You must separately schedule or list these items and show an updated, appraised value. Typically, these items are not subject to a deductible, but inquire with your agent.
Final advice: Don’t file a claim for every small problem you have – like a broken window, perhaps, because a neighbor’s child hit a baseball by accident onto your property and it went through your big picture window. Filing too many small and even large claims can lead to the insurance company canceling your policy. Then, finding a new insurance carrier can prove tough and may require excess or surplus lines coverage, which typically is very pricey.
Be prepared. If disaster strikes, it’s good to know you have obtained all coverages necessary and your insurance company has your back.