Reviewing your Homeowner’s Insurance Coverage

by Tom Tousignant

in Blog, Financial Safety, Refinancing

It’s easy to get your Homeowner’s Insurance when you buy a house, and then forget about it.  The following is a guest article from Nico Iannelli with Medallion Insurance Services, on the importance of regular insurance reviews:

It’s Not Just Home Insurance

 The largest purchase most people make is a home.  Surprisingly, given the importance of this purchase and the impact that losing it could have on their lives, many people not only carry inadequate insurance but also rarely, if ever, review their insurance policies.  When you buy home insurance you’re not just protecting your home, you’re protecting your way of life.  An important question to consider when purchasing insurance is, “If I were sued would my existing personal insurance policies provide me with adequate protection?”

 Sure it’s easy to save money on insurance.  Some agents may say it’s simply a matter of omitting optional coverages, reducing liability limits, under-insuring property, increasing deductibles, or reducing the type of perils a person is insured against, just to name a few.   The problem is, when these options are exercised, one may lose the value that was sought when the coverage was initially purchased. 

 So how do you know the “quantity” of insurance purchased is appropriate to the cost?  To paraphrase a well-known saying, a good agent knows the client; a great agent knows the coverages.  No two home or homeowners are exactly the same.  Everyday someone suffers a loss and discovers his/her insurance protection is outdated.  But then it’s too late.  An important part of an agent’s job is to help clients prevent a loss and get the greatest value for their insurance dollars.  Your insurance agent should try to eliminate costly overlaps, bring your insurance up to date, and provide a full line of quality products to meet all of your personal and business insurance needs.  It won’t cost you a cent to have your insurance reviewed, but it could cost you money if you don’t.

 In event of a catastrophe, many homeowners find that their insurance is inadequate.  Either replacement costs have been woefully miscalculated, or in the case of an older home that must be rebuilt, there is either no or insufficient ordinance coverage, so that rebuilding to code must come from the insured’s pocket.  

 If your two-year-old flat screen TV were stolen, would you be fully insured to pay for the cost one?  You might not be, but you can be.  Homeowners policies are occasionally written on an “actual cash value” basis, meaning the amount the insurance company will pay equals the replacement cost of stolen or damaged personal property, minus a deduction for depreciation.  The result is that you will have to make up the difference in cost yourself.

 With Replacement Cost coverage you get:

  • Full cost of replacing the insured items at the time of the loss.
  • Complete cost of repairing or restoring the item at the time of the loss.
  • Up to 400% of the actual cash value at the time of the loss.
  • Any special limits of liability already described in the policy.

 Agents and insurers have not yet begun to educate the public of the importance of adequate insurance coverages, let alone the advantages of earthquake, flood, and ordinance or law coverages.  A prudent agent will periodically review property coverages with clients, taking a careful look at how needs have changed.  For example, the young couple who bought a “starter” home several years ago may have added an addition and swimming pool, purchased a boat, and “his and hers” Rolex watches.  This couple worked hard for the finer things in life and they need to protect their hard work.

If you haven’t reviewed your coverage in more than a year, call your agent, or, call a new agent to get a competing offer.  When you are refinancing your house, make it a point to review your coverage as well.

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