Have you checked your homeowner’s policy lately?
If a total disaster occurred, would you be able to rebuild the same house with the insurance money? These are questions many of us fail to review after the initial purchase of our home. If our insurance premiums continue to stay at reasonable rates, we usually find no reason to call our insurance agent. But we mustn’t forget that over the years, construction cost and replacement costs are always on the rise.
The best advice is to be proactive before a natural or accidental disaster hits your home. Review your homeowner’s policy annually and be sure you are protected fully. If necessary, you should be able to rebuild without taking money from your hard earned savings.
Find out how much coverage you need to replace your home and its contents at full replacement value. Keep in mind this amount does not always equal the current value of the house. Have a professional home-replacement estimator or a local homebuilder give you an estimate, be sure to include any unique details that would add to the replacement cost such as fine cabinetry, marble flooring, specialty lighting and so on.
Now you need to determine what kind of coverage you want. Here are a few policy features to consider:
Guaranteed Replacement Cost Coverage
The insurer pays for the complete rebuild of your house regardless of the cost. It may be hard to find, and cost a few dollars more – but should disaster strike you will be happy you have this coverage.
This feature allows your home’s insured value to stay current with the marketplace but does not factor in inflation cost of new construction.
Extended Replacement Coverage
This feature caps the payout at around 125% of your insured value. As we discussed the current value of your home does not always match the cost to rebuild the house.
Be sure to check the policy for the following:
In high-risk areas, you may be required to have flood insurance. You can check FloodSmart.gov to find out if your home is at risk.
Check your deductible
You may think you have a maximum out of pocket deductible but in specific storms, earthquakes or hurricanes your deductible may be determined differently and cost you more than you think. Be sure to ask about different deductibles or find a flat-rate deductible policy no matter what type of disaster hits.
Beware of hail damage clause
Most standard policies cover hail, but only cosmetic damage, a torn off structure or roof replacement may be excluded. Try to avoid special policy deductibles for hail, instead opt for set dollar deductible for hail damage. Check CoreLogic to see if you live in a high-risk area, if so you may want to include cosmetic damage coverage.
Consider mold or sewage backup coverage
This may raise your homeowner’s policy cost considerably, so do your homework. If you live in an old home and a humid climate, it could be a worthwhile expense.
Protect your unique valuables
You may need a separate policy for fine art, jewelry, high tech items, etc. Check with your insurance provider and make sure you appraise these items.
Check your policy today, and avoid the surprise of being underinsured. Paying a bit more for your plan can save you big should an unforeseen disaster occur.