Homeowners Insurance: Things to Know

By Scott Best

Do you have enough insurance?  Do you have the right kind of insurance?  Do you know what the best insurance companies are for different types of insurance? How reliable are the insurance companies you deal with?  Do you understand what’s really covered in the policies you carry, do you fully understand what isn’t?  If you were honest with your self, you’re probably like the greatest portion of Americans and you answered “No” to all or most all of the above questions. 

So what does this tell us about what we buy insurance for and how we buy it?  For me at least it leaves even more unsettling issues and unanswered questions.  How far are we willing to trust others to protect us and what we hold dear?  How far are we willing to go before we actually get involved and force those that sell us these policies which are supposedly protecting us, to be forthright in their dealings with us?  When’s the last time you read an insurance policy you purchased and actually understood what it said about what was covered and what wasn’t?

Wow, lots of question and in this and subsequent articles I intend to cover some of the more powerful questions I just asked, to help us all get some clarity.  I hope to be putting forth some information that will help you better protect yourself, not only with insurance but from insurance and unscrupulous insurance agents and companies who might be putting their own capital interests too far ahead of your protection. 

So let’s begin shall we?  Do you have enough insurance was the first question.  To better understand this we have to first know enough about our own lives and properties to even begin thinking about such a thing.  And within that we have to face the ultimate question.  How much of what we have or hope to have, are we willing to part with to protect what we have or hope to have? 

How much should insurance cost for a particular type of coverage?  Although there is no clear cut answer, one thing that is for sure is the more value the insured item has, the more it costs to insure it.   What we actually pay is more or less proportionate to how much we can afford, how much value, monetary or other type value we place on the object of insurance and how much of a risk factor we pose to the insurer.  

Homeowners Insurance

The insurance industry lists the most insured items as home, health, auto and life. We want to protect our homes, our place of residency, and it’s called home owners insurance. 

The best homeowners insurance covers replacement cost.  This is supposed to cover for the actual cost to rebuild your home, should it be totally destroyed by covered perils.  Be careful here as not all insurance companies cover the same types of perils. It’s a smart person who knows about where they live.  This meaning that one should try to find out what the most common types of loss in the area you live in are.  Is weather or natural occurrence loss a big issue, fire, crime?  Knowing this will better prepare you to scrutinize your insurance policy and allow you to get the coverage’s you need.  

Homeowner’s policies usually include riders or inclusion statements for personal property such as cloths and household appliances and furnishings.  But not everything will be covered.  High ticket items such as lavish entertainment systems and computer systems usually require individual listing and separate riders (meaning more cost to insure) to have coverage.  Expensive jewelry is another item not usually covered without special riders and documentation.  Again, with personal property coverage it may be a good idea to cover for replacement cost rather then a standard dollar figure. Review the limits in your policy and the value of your possessions at least once a year. 

Other coverage a typically homeowner’s policy include are loss of use and personal liability.  Loss of use is for payment of the cost to you, of living someplace besides your residence in the event of loss significant enough to displace you from your home.  Most policies have a time and dollar limit established for loss of use as well as a minimum or out of pocket amount or deductable specifically for loss of use which needs to be met.  You should be aware of these amounts. 

Something that is relatively new to the homeowner’s insurance policy is protection from Identity Theft. A number of insurers are including riders for homeowner’s policies that cover you in the event of identity theft, a peril that is becoming more and more common all the time, in our new information age.

So it’s really up to the individual to determine how much insurance they need.  Insurance agents will recommend all kinds of thing to you in hopes of getting a bigger percentage in his company check.  But when it comes right down to it, as stated before .What we pay is more or less, proportionate to how much we can afford, how much value, monetary or other type value we place on the object of insurance and how much of a risk factor we pose to the insurer.  

The more we value an item, object, even a life, (I know that sounds a bit cold) the more willing we are to part with what we now have or will have to protect it.  The more value an object has, the more risk involved in maintaining it, the higher the premium in insurance dollars it will take to protect it.  The national average for homeowners insurance is about $480 per $100,000 of coverage in combined structure and contents values.  Amounts are about 10% higher for full replacement cost. 

So how do we make sure that our coverage is adequate or that we get treated fairly in the even of disaster?     The best way is to document everything.  Take annual pictures of all your possessions.  Take pictures of every room in your house including the outside and any out buildings you may have.  Make sure the pictures are detailed enough to determine items, brands, amounts and so on.  As much detail as you can get in a picture.  If you are putting pictures on a CD or DVD from a digital camera, make two copies, the same with prints from film.  Then keep the pictures someplace safe preferably off site like in a safety deposit box. 

Keep a written list of your higher ticket items especially if you insure for replacement cost.  Up date the list yearly not just with the new items you have added, but with the current market price of the items you previously listed.  Remove items you no longer have. Don’t destroy the old list, in fact if you can use something like Excel to put the inventory into a spread sheet so you can keep yearly records in progression.  There are some simple software programs that are especially designed to do this as well.  Again, make multiple copies and keep at least one copy in a safe place off site.

It sounds like a lot of work, and for some it might be.  How ever  it is the overall best method to help guarantee accurate treatment by the insurance company should disaster strike. 

In later articles more of the questions posed at the beginning such as understanding insurance policies, and picking the right insurance company as well as working with insurance agents will be covered in more detail.

Scott Best is a freelance author in association with INSUREiT Central

Copyright © 2008 Scott Best.  All Rights Reserved