Insurance can be a touchy subject as no one likes paying for something that may or may not happen. Homeowners really do not have a choice on the subject because there is a minimum amount of homeowner’s insurance that is a requirement in order to have a mortgage. Whether you choose to increase the coverage, get rental insurance, add special policy riders, or purchase earthquake or flood insurance, it is up to you.
Do you Feel Lucky? Well, Do Ya?
Deciding what you should do about insurance coverage is like the pressure of sitting on a table in Vegas. It’s a crapshoot and you are hedging your bet on just how lucky you feel you might be in terms of avoiding a robbery or natural disaster. If you have just inherited a collection of jewelry or antiques, you could now be a target of a criminal. Losing those items would be devastating because they might also have sentimental value.
A standard policy only pays 50-80% of the dwelling’s value plus personal items based on the cost to replace those items. That does not leave you with good odds, especially if you live in California and do not have additional earthquake coverage or if you are currently in the middle of a flood plain without insurance for it. If you live in a coastal region, you also are taking the risk that you may have to contend with a hurricane or windstorm while those in the central states have a greater risk of a tornado so they know their luck is pretty high for avoiding an earthquake.
If you opt out of any of these policies and then disaster strikes, you can still get some help from government agencies. However, it is not going to be the same level of protection that insurance can guarantee in terms of replacing valuables. The government can help you get back on your feet, but it takes time to get aid and it is not always the best start after a major disaster. No one can quite forget what happened to those from Hurricane Katrina in terms of getting the necessary help.
While we all like to gamble, there are some things that are worth putting your money on the table for even though you hope to never collect. Spending the money provides peace of mind because you will never have any notice to prepare for a disaster or other event that takes away all your hard-earned personal belongings and dream home.
What Type and How Much?
Despite these risks, most people opt for the basic coverage, which is based on the size, type and location of the dwelling.
- Home: policies cover dwelling and personal property loss.
- Condominium: these policies tend to only cover belongings and an extra policy would need to be purchased to cover the dwelling.
- Manufactured Home: a special policy must be purchased for the dwelling and personal property if the home is manufactured rather than considered a single-family home.
- Farm or Ranch: a home located on a farm or ranch does not fall under a standard homeowners’ insurance policy, so a farm owners’ policy would be needed to protect you from tornadoes or hail as well as provide coverage for the property, liability, and personal property.
- Renter’s Insurance: this policy can protect renters in terms of their belongings in case they are stolen or damaged.
There are a number of other factors to consider when deciding on insurance coverage
- Check if other structures on your property are covered, such as a shed, guest house, or detached garage.
- See if the insurance policy can provide funds for living expenses while you are unable to live in your dwelling due to damage.
- Do not select a policy that offers stated value coverage because you will only receive the amount listed on the policy and that could be well less than the actual value loss.
- To qualify for replacement cost coverage, your property must be insured for at least 80% of the cost, which can cost you a bit more.
- Purchase riders for oriental rugs, artwork, antiques, jewelry, and home office equipment. This will involve an appraisal and photo of each item so that the rider can have a detailed listing of what is included.
- Shop for a policy based on coverage rather than just price. Remember the old adage that you get what you paid for and you don’t want to cut corners when it comes to replacing all your belongings.
- Take the time to read your policy – even if it seems like the cure for insomnia – and educate yourself in terms of what is covered and what is not. This includes knowing your deductible amounts, all limitations, flood and earthquake coverage, and special riders. If you have questions, ask your insurance agent because that is their job!
If you want to purchase additional riders or other types of insurance, such as earthquake or flood policies, it is best to check on what companies provide plans and always shop around. The Internet has made this task a lot simpler by offering side-by-side comparison shopping for various types of insurance in terms of price and coverage. You will most likely still need to contact insurance agents about specialized riders on jewelry because appraisals and other reviews will need to be conducted before an appropriate cost can be established.
The Value of Record-Keeping
Whatever type of insurance you decide on, the most important thing you can do is ensure good and safe record keeping for your policy information so it is within reach in case you do need to cash in. The insurance industry advises that you do the following:
- Have the name and contact information on your agent or insurance company in a safe, accessible location.
- Maintain a detailed home inventory of all your personal belongings through an online service or a computer file that can be stored remotely.
- Get appraisals of any special items that require their own insurance riders, such as jewelry or antiques.
- Take photos of everything that would need verification for replacement cost purposes.
- Put your insurance policy in a safe place, including storing scanned files of the documents on a computer or online depository.
- Keep all vital paper records in a remote location in case there is a disaster or robbery.
There are services available that can help you reach all this information on a 24/7 remote basis through a computer, PDA, or mobile phone so that it is there when you need it the most to expedite any insurance claims. After all, if you purchased this insurance and you have an unfortunate event, you need to be able to get a hold of that information quickly so you can shorten the time it takes to receive compensation and start over.