One of the unpleasant surprises in the devastation of Hurricane Sandy was the role of homeowner’s insurance.
Do you have enough?
Your home is one of your largest assets. Does it have enough coverage? Don’t be underinsured. Remember we’re not talking about the fair market value of your home, but the cost to rebuild it. Construction costs routinely change. Periodically review your policy to see if the coverage reflects today’s rebuilding costs.
Coverage in natural disasters
It is important to find out what your policy covers—and just as important, what it does not. For example, standard homeowner policies rarely cover earthquake, flood or mold damage. If you live in a low-lying area and take out flood insurance, note that it usually covers $250,000 for boilers, washers, dryers, and other utilities but no other contents of your house or garage: for those you will need to look into different coverage. Frequently, damage caused by wind is a separate deductible charged as a percentage of the house’s value. It can be as much as 10%!
Reputation and financial strength of your insurance company
Cheap isn’t always the best. Look for a company with a good rating for financial strength (A.M. Best and Fitch rates them). What is its reputation for claims? Will the insurance company argue over every dollar you claim?
Jill annually grumbles about the high premiums for her homeowner’s insurance—but not anymore.
Jill and Bonnie had no idea that their dishwasher was leaking, causing water and soap to go through the kitchen floor to the basement. While ripping out the floor, the contractor found asbestos. The entire flooring for 4 rooms had to be replaced. Not surprisingly, it was a nightmare to live with no kitchen, furniture compressed to a few rooms plus the garage, everything boxed, cabinets ripped out, etc. for more than 2 months.
However, the insurance company paid without any arguments not only to the companies involved in the repairs, but for our out-of-pocket expenses. AND, surprisingly it didn’t increase our premiums.
While Jill doesn’t wish this experience on anyone, the insurance company became a partner, not an adversary.
Keeping your documents
Whether it is auto insurance or homeowner’s, you need your policy available in case of a disaster. If the disaster involves your house or the car in the garage, access to a copy is critical. Clients of Financial Connections could upload a copy to their Client Web Portal (see related article).