CORRECTION: The original column contained an error in characterizing coverage for fire-related damage from earthquakes. The Insurance Information Institute reports that standard home and business insurance policies typically provide coverage for some types of damages related to earthquakes, "such as fire and water damage due to burst gas and water pipes." Inman News regrets this error.
It’s springtime and the news is filled with unseasonably late blizzards, flooding, mudslides, tornadoes, hail and devastating fires. In the summer and fall, many areas must prepare for hurricanes. Of course, there also could be an earthquake, a volcanic eruption or a tidal wave. Do you have the insurance coverage you need to protect your home?
Many people believe that their homeowner’s insurance policy provides protection against most disasters. Sadly, most people don’t discover there is an issue with their policy until they have a major claim.
In order to protect your home, the first question you must address is whether you have the right type of coverage for the risks in your area. The second issue is whether you have the appropriate amounts to cover any losses that you may incur.
Here’s how you can make sure that you have adequate coverage to protect your home.
1. Certain types of risks require additional coverage
If you have jewelry, computers, artwork and other valuables that exceed your basic policy limits, you will need a special rider to cover those items.
Most home insurance policies cover "water damage" and fire damage. The challenge is that if the damage comes from the ground up (i.e. from a flood), it is not covered unless you have flood insurance. To determine whether your property is in a flood plain, visit the FEMA Web site where you will also find a wealth of information about what is available on a federal level to protect your property.
2. Don’t overpay for your basic homeowner’s insurance coverage
Many lenders will automatically ask you to insure your property for an amount equal to the loan amount. In many places in the country, the loan amount is significantly higher than the replacement value of the improvements. Carrying "extra" coverage is a waste of money.
3. Insure for "full replacement value"
Make sure that your insurance policy covers "full replacement value." Some policies reimburse you only for the "depreciated" value of your appliances and other household items. Also, make sure that your policy provides for replacement with the same quality. You don’t want a $1,000 stove to replace your $7,000 top-of-the-line restaurant-style range. Check with your insurance agent to make sure these provisions are in your current policy.
4. Document what is in your home today
Take pictures of as much of your house as possible. Include both the inside and the outside. For example, after the 1994 Northridge earthquake in Southern California, my insurance carrier claimed that some of the cracks in my stucco were there prior to the quake. Fortunately, I had pictures to support my claim. If you have a video camera, use that as well. Many people overlook artwork, silver, china, clothing and other items. Store your pictures and videos in a safe place away from your property. A smart move is to back them up using a computer backup system such as the ones provided by Mozy or Carbonite.
5. Make sure your home meets the insurance company’s requirements
People sometimes forget to maintain their fire extinguishers and smoke detectors as required by their homeowner’s policy. Failure to have these protective devices in good working order could result in denial of your claim.
6. Condominium owners need a policy separate from their homeowners’ association policy
The "master policy" on a condominium building provides for replacement of the building. It does not provide for replacement of your personal belongings, nor does it insure you against theft or other types of losses. You will need a condominium owner’s policy to cover those additional risks.
7. If you are renting, purchase renter’s insurance
Your landlord’s fire insurance policy will replace the building, the carpets and the appliances. The landlord’s policy, however, does not cover your personal belongings. You need a separate renter’s policy to protect your belongings from theft, water, fire, or earthquake damage.
8. Consider purchasing an "umbrella policy"
These policies provide extra liability coverage from both auto accidents as well as for your home. For example, my mother slipped and broke her hip in front of my house. My umbrella coverage covered 100 percent of her medical costs plus providing an additional settlement.
If you have questions about your coverage, speak to your insurance professional. Also, it’s smart to compare costs and levels of coverage. Check the Consumer Affairs Web site to learn more about how your insurance company ranks as well as what you need to do if you have a problem with a claim.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com.
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