You buy a house and take out a standard insurance policy on it. You pay your premiums and renew every year. All seems sound and simple until a storm comes and your house is flooded. All of a sudden you are told that you don’t have flood insurance and that nothing it covered. Don’t let yourself wind up in this situation. Don’t just renew your policy every year but reintroduce yourself and get to know it.
The first item I need to urge you on is to make sure your policy is renewed on time! Write it on your calendar, program it into your phone, and make a big mental note. Usually policies are written yearly. In our industry we witness losses denied too often because of a lapse in coverage. The loss just so happened to occur in the month that sat between expiration and renewal. If that’s the case, you are unfortunately on your own to cover the expenses. I’m not saying don’t trust your agent to properly renew it for you, but I am holding you accountable for making sure it is done. You should obtain an updated copy of your policy once it is renewed.
Educate yourself on the amount of coverage you have. Is your dwelling (structural) coverage sufficient to support a major disaster? Consult a local building contractor if you would like a second opinion on just how much you should allot for, keeping in mind any changes you may make to the property. Do you have a separate flood policy? Flood coverage is not included in basic homeowner’s policies. What other events are excluded from your basic coverage? What is your standard deductible? What is your wind deductible? Are you subject to a specific hurricane deductible? Some deductibles can be very different than you standard deductible. Verify what exact perils the policy does and does not cover.
That covers mostly the house’s well being, but what about your personal property? Coverage for your contents is based on a percentage of your dwelling coverage. You may want to take out additional contents insurance for your antiques, guns, computers, silver, etc. This is where an inventory list comes in handy. If you take the time to inventory your belongings, say during your seasonal cleaning, you can bring that with you when reviewing the policy with your agent. An inventory would also come in handy if you were to suffer a major loss such as a fire. You’ll need an itemized contents list to submit to your insurance in order receive your contents limit.
What responsibilities do you need to uphold under this coverage? Keep inflation in mind. As property values rise, usually building costs do too. You must insure your home up to a certain percentage of the cost to replace it which will be set by your insurance company. Say this requirement is 80% (and just for this example you have no deductible – not typical I know): If it would cost $300,000 to replace your home and you have $180,000 (75% of the required amount) as your dwelling limit, your insurance company may only cover 75% of your loss. If you have $75,000 worth of damage, you could be responsible for paying $18,750 out-of-pocket!
Responsibilities also include proper maintenance. If you have a second home here on Cape Cod and you don’t refill the oil to keep the heat up during the freezing months, a pipe might freeze, break and flood your house. Since you neglected to keep the oil tank full and properly care for the property your insurance company may not cover the repairs. Seasonal maintenance checklists aren’t always just great suggestions or ploys for you to spend more at your local hardware store. You really should clean those gutters! Your coverage just might depend on it.
Talk with your agent about what happens if you do experience a loss. Ask them how much additional living expenses you are covered for if you lose the use of your home. Make sure it’s enough for you and your family. Don’t hesitate to set up an appointment with your insurance agent to review your policy at any time. They are your agent! It is part of their job to translate your policy details for you and make suggestions.
That may be a lot of information to take, in so here is a recap:
- Always make sure your insurance policy is renewed on time and that you receive a copy
- Make sure you have the proper amount of dwelling coverage not only so that you have enough to cover the cost of repair, but also to meet your insurance requirements.
- Get to know the different deductibles you may be subject to and in what instances you will encounter them.
- Look into possibly needing additional policies such as Flood insurance
- Make & update your contents inventory!
- Know your responsibilities required by your policy to keep coverage. Spring cleaning anyone?
- Check on the living expenses you’ll be granted if you lose the use of your home to damage.
- But all and all: Know your policy – talk with your agent!