Having Sufficient Homeowners Insurance Is Vital
When a disaster strikes is not the time to discover that a current homeowners insurance doesn't really cover the damages incurred. Here are a few things any smart homeowner can use to determine if their coverage is sufficient for their current situation.
1.Understand the claims process
Two policies can promise the same amount of coverage, but they can be vastly different when it comes to making reparations after a loss. Have the agent explain exactly how claims are handled; is a check received for the entire claim upfront, or just a fraction? Does the company pay for all of the things lost, or only those things that are replaced?
Some policies will give the cash value of possessions right after a loss and wait to cover the replacement value when items are actually replaced - with the receipts to prove it. This could be a problem if no cash reserves are available.
Filing a claim involves two steps - proving certain items were owned and verifying their worth. Using a video camera to record anything of value is a great idea. If this is not possible, make a list and shoot a few rolls of film. Stash the video or photos in a safe-deposit box with a copy of the insurance policy, or someplace else outside of the home.
Many times, homeowners and renters policies limit the amount that can be collected on some big-ticket items (like computer equipment, jewelry, furs and fine collectibles) to a fraction of the replacement value. If this is the case, pick up a special policy known as a "floater" or "endorsement" for each of those items. A floater will also reimburse the insured if they simply lose the article. Save the bill of sale of any newly purchased item and fax a copy to the insurance agent. If the item is older, have an appraisal done. Again, save one copy and send another to the agent. This will provide proof of ownership, and there will never be a dispute over what it's really worth.
4.Keep pace with inflation
This is especially important with a homeowners policy. It may have cost $200,000 to build a home 10 years ago, but it might cost $240,000 to replace that same home today. Many companies have inflation guard, which covers the increasing cost of rebuilding. When a policy comes up for renewal, talk to the agent to verify that coverage amounts are still realistic. And when making an improvement, add it to the total.
These are a few considerations that can help to decide if the current coverage truly is sufficient or if perhaps there is a need to bolster the policy to cover any additions or changes that have taken place.