Part 1: Be Prepared Not Surprised When Disaster (or Damage) Strikes
1. Review Your Policy Every Year
Life changes and market changes can impact your home insurance policy — everything from having a baby to declining property values may mean the insurance policy you have in place should be adjusted.
Kiplinger’s 10 Reasons Your Insurance May Need A Checkup goes through items including
- Have you gotten married or divorced?
- Have you acquired any new valuables such as jewelry, electronic equipment, fine art, antiques?
- Did your teenager get a driver’s license?
New or changed circumstances can mean you should make changes to your policy — reviewing your policy at least once a year will help prevent unpleasant surprises.
2. Understand When You’re Covered and When You’re Not
As The Nest puts it “Insurance pays for sudden, accidental events, not for gradual decline and aging.” If a tree falls on your roof, repairing or replacing the roof should be covered by your policy. If, however, your roof starts leaking after 10 years due to age or general wear and tear, standard home insurance policies won’t cover the cost.
Keep in mind, too, that “wear and tear” vs “natural causes/disasters” can be differently addressed by different insurers and in different parts of the country. Policies in hurricane prone areas such as Texas and Florida generally do not cover roof damage that is caused during a storm.
If you live in a flood prone area (either living near the coast or large body of water or in a hurricane zone), be aware that homeowners insurance doesn’t extend to property damage caused by floods. In fact, the Insurance Information Institute estimates that only about 12 percent of homes in flood prone areas have flood coverage. You can obtain flood insurance through the National Flood Insurance Progam. Earthquake damage also requires a separate policy.
3. Make Sure Your Policy Matches Your Needs
Your homeowners insurance policy should be tailored to your life and your home — if you’re not concerned with finding a temporary place to live while repairs are underway, make sure you’re not paying for “displacement coverage,” which provides reimbursement for living costs while you are out of your home.
Confirm whether your policy covers “replacement costs” or “actual cash value.” If you are covered for the “cash value” of an item, its value will be based on the value the item would have had — that is, if your ten year old stereo system is stolen, you will be reimbursed the amount that old stereo would cost. If you’re covered with “replacement cost,” however, your policy should pay to replace that stereo with a comparable brand new one. It’s a good idea to make and maintain a household inventory of the contents of your home (with receipts if you have them), including your clothes and jewelry.
There are online tools that will help you determine replacement costs for your home for less than $10:
- AccuCoverage walks you through a detailed questionnaire to prepare a fairly specific report outlining the costs of replacing your home
- HomeSmartReports offers a quick review and then provides high and low estimates for replacing your home, but doesn’t allow for custom features
Homeowners insurance resources
- Home Insurance Basics (insure.com)
- What does a standard home insurance policy cover? (homeinsurance.com)
- How Do You Get Your Homeowners Insurance to Pay for Your Leaking Roof? and 5 Important Elements in Any Homeowner's Insurance Coverage (TheNest.com)
- Hurricanes and Flood Insurance: What Homeowners Should Know (nolo.com)
- Breaking Down Homeowner’s Insurance Coverage (moneycrashers.com)
Next Week, Part 2: Saving Money While Keeping Your Home Protected