10 Tips To Help You Maximize Coverage and Minimize Your Cost
In 2011, natural disasters accounted for nearly $380 billion around the world in direct property losses — the costliest year ever (according to research and report by the global reinsurance firm Munich Re). This year in the U.S.A. already, wild fires, floods and hurricanes have destroyed homes across the country — more than 30 homes gone in wild fires in Nevada in January, more than 100 homes damaged and 13 destroyed by a tornado in Michigan in March, 650 homes damaged and about 200 destroyed in Texas by tornadoes in April, and 345 homes destroyed by wild fire in Colorado in June.
It doesn’t require a natural disaster to strike for homeowner’s insurance to come to your rescue — a burst pipe, a burglary, an unhappy pet can all lead to damage that may or may not be covered by your policy. To make sure you have the right policy and the best price, check out these tips:
1. Being safe is cheaper
Insurance companies like paranoid customers — your premium should go down if you install smoke alarms, security systems, and shatter-proof windows.
2. Shop around
Things change. If you haven’t done so recently, spend a couple of hours pricing home insurance with at least three different carriers.
3. Bundle up
You may have heard it on TV, but that doesn’t mean it isn’t true — insurance companies reward customers who hold multiple policies with them. Consider placing your car and home insurance, and any other insurance such as boat, motorhome, etc., with the same carrier.
4. It never hurts to ask
Ask your insurance agent if your carrier offers any discounts — for being more than 55 years old, for having been a long-term policy holder, for having a smoke-free home, etc.
5. Burned to the ground — but the ground’s still there
Many home insurance policies cover the land as well as the house — for most homeowners, it’s unnecessary to insure the ground beneath their home — even after fire or rain, the land will still be there. Find out if your policy includes the land and if you can remove it from your policy.
6. Raise the deductible, raise your savings
It’s a good idea to review your deductible every few years, as your financial status changes over time. If you’re in a position to cover a higher deductible, compare your annual savings if your premium is lowered (call your agent to determine the premium on a higher deductible policy) against the possibility of dipping into that money should an accident happen.
7. You’re covered as well as your home
Most insurance policies include $100,000 to $300,000 in liability coverage that covers claims against you — and your pets — so if your neighbor sues because your dog bit her or because you knocked her down with your bike, your homeowner’s policy may cover that claim. If your home is damaged to the extent that it’s unlivable, your policy may provide coverage for alternative food and lodging costs.
8. Don’t rely on your memory
It’s a good idea to keep an inventory of the contents of your home, including model, cost and date of purchase for larger or more expensive items. Once or twice a year, grab your smart phone and record a video tour of your home — narrate with model numbers or other details. Type up a list of notable belongings with their details. Store the video and document with a friend — or online in “the cloud” — so that it doesn’t go up in smoke with the rest of your things.
9. How covered are you?
Make sure you know what your policy covers and doesn’t cover, and for how much. Most policies include limits for various categories of belongings such as artwork and jewelry. Know your limits and insure anything particularly valuable with a rider or separate policy.
10. What it’s worth vs. what it costs
Check your policy to see if your home and its contents are insured for “replacement cost” or “actual cash value” (ACV). The home itself will almost always be insured for replacement cost — literally the amount it will take to replace the home. Often times, however, personal belongings are covered at ACV (which is replacement cost minus depreciation) — the older your belongings, the less money you will receive to cover their loss.
Most insurance companies offer replacement cost coverage as an option. Take a stroll through your home and consider what it would cost to replace everything in your living room, bedroom or kitchen and the age of the items in your home. Find out how much a replacement cost option would add to your premium and decide whether or not it’s worth it.