Written by Kelly S. Olson Pedersen, CFP®, CDFA

 

 

 

 

 

 

 

Don’t wait until a claim has occurred to review your policy…that might be TOO late

 

Insurance is a tool that can help us to reduce our exposure to different types of risk.  Not only risk of damage or theft of your property (homes, cars, toys, etc.) but equally important is the risk of financial loss which could potentially impact that nest egg you’ve worked so hard to build.

We find that many times, people will only research their insurance policies when they are shopping around.  But once the insurance is in place, they tend to forget about it and figure everything is set.

We recommend reviewing your insurance policy periodically.  There might be changes to your policy from year to year or the policy you took out years ago, may no longer be adequate to cover your needs.

Here are a couple of tips for reviewing your homeowner’s policy:

 Know your policy:

• Do you have an “open-peril” policy which covers all perils/risks unless it is excluded or a “named-peril” policy which only covers the perils/risks that are named in the policy?
• Most insurance policies now a days are open-peril, so you really need to know what the exclusions are. Common exclusions are hurricanes, floods, earthquakes, mudslides, sinkholes, water sewer backups, sump pump failures and limits high valued items (art, jewelry).
• Water claims can be very tricky… You can add a rider to include coverage for a sump pump failure or water sewer backup, but even this is usually limited to a small amount.

Buy and Maintain ENOUGH Insurance

• Cover the home and belongings – many policies will allow you an additional 25% of your dwelling value to make up for inflation and rising building costs and have an automatic coverage amount for personal belongings based on your dwelling coverage.
• Cover the replacement costs, not just the current value – this is especially important in older homes where it would cost much more to replace those solid wood doors and crown molding!
• If you are making home improvements, make sure to let your insurance company know. You may need to have the replacement value adjusted.
• Outbuildings (sheds, pole barns, detached garages, etc.) are usually covered for about 10% of your dwelling value. If the combined value of your outbuildings exceed this amount – talk to your insurance provider to make sure you are properly covered.
• If you have a college student living in a dorm – their personal belongings should be covered under your homeowner’s policy. BUT…make sure that if they move off campus, they take out a renter’s policy.

Create a home inventory

• Take video of your house and all of your belongings for proof of what you own, open the cupboards and drawers too. In the event of a claim, you will need to provide specifics! Store this in the cloud or at the very least outside of the home.
• This video also aids in the claims process to prove your house was in good condition prior to the event.
• Make sure to schedule your high value items (jewelry, art, antiques)

Evacuation plan?

• Not only about “how” you would leave your home, but what happens afterward
• What documents would you want to take with you and can you get them quickly?
• Prescriptions, change of clothes and water

Don’t rush to repair! DO rush to submit your claim!

• So you have a hole in your roof! Of course you will need to cover it to prevent any further damage – but stop yourself there!  The adjuster will NEED to see the damage with their own eyes, not just a picture.
• Don’t delay too long. Some policies maintain a window of time to submit a claim.
• Never sign your claims directly to a contractor and never feel forced to use a contractor the insurance company suggests.

Understand what “liability” means

• Covers damages for anyone that is held legally liable for something such as injury or negligence. It also covers legal fees for your defense.  Coverage is limited to the amount listed in the policy, so consider increasing this…especially if you don’t have an umbrella.
• Most homeowner’s policies have s a small amount of medical payments coverage in it. Talk to your provider about increasing this limit to the max available. It’s only a couple dollars a year and it might be enough to avoid a liability claim if someone gets hurt on your property.
• Add an umbrella policy to extend your liability coverages – it’s very inexpensive.

On a positive note, don’t miss out on discounts you may be eligible for (multi-policy discounts, security systems, deadbolts, updated roofing/windows and many).