By David Miller, Vice PresidentPlexus Private Client Solutions
Home insurance is essential, but only having the right home insurance offers true piece of mind.
What's more, there is nothing worse than being surprised by an expense not covered by your insurance.
With these points in mind, here are eight things to consider as you think about your homeowner's coverage.
Finally, if you want to discuss issues raised in this article, please contact me at 847-307-6141 or firstname.lastname@example.org.
1. Your home's probably underinsured. According to CoreLogic, which provides analytics information to insurers and other businesses, 60% of U.S homes seem uninsured by an average of 20%. Most home insurance companies will provide additional coverage if the amount listed in your policy's not enough to rebuild your home. The amount of this cushion varies from one company to the next.
The bigger concern, however, is not working with an agent that insures the home correctly in the first place. You don’t want to find out at the time of loss that your policy provides you with 20 percent additional coverage when you need 50 percent more coverage to completely rebuild your home.
2. Your deductible may be too low. Many insurance companies are starting to provide meaningful premium reductions at higher policy deductibles. Our rule of thumb is to accept a higher deductible when the increase in deductible divided by the premium savings is five years or less.
For example, let’s assume your current deductible is $1,000. The insurance company would decrease your premium by $450 if you increased the deductible to $2,500. If you divide the additional out-of-pocket expense ($1,500) by the premium savings ($450), the result is 3.3 years. In this example, we would recommend moving to the higher deductible.
3. Your deductible may have changed. We have started to notice that some direct writers are moving towards a percentage deductible as opposed to a flat deductible for all causes of loss. Other companies are implementing higher deductibles for certain types of losses. Many range from one percent to as high as five percent for losses due to wind or hail.
4. You may have little or no coverage for losses due to sump pump failure or sewer backup. Most policies issued by direct writers provide no coverage if water enters your home through a sump pump failure or a sewer drain backup. Many of these same companies will allow you to buy back some coverage. The amounts may be low ($10,000 is common), or the buyback includes restrictions on the types of property covered.
Even if you have an unfinished basement, the costs associated with a sump pump/sewer claim might surprise you. We represent companies that offer higher limits, all the way up to limits on your home and/or contents.
5. You may have a depreciation schedule for hail damage claims to your roof. Some companies are including a depreciation table in their policies that list how much less they will pay for your roof, based on the type and age of your shingles. For example, if you have a 20-year-old roof and asphalt shingles that hail damaged, your company might only pay for 50 percent of the claim.
6. Your policy might not cover claims for Personal Injury. Personal Injury refers to such things as libel, defamation, and invasion of privacy. While these types of claims may seem far-fetched, they are on the rise with the pervasive use of social media. And while you may be careful with what you post about your neighbors or friends, your children may not. They might send an inappropriate photo or text to a friend, and that message's forwarded and quickly goes viral. Adding this coverage to your home insurance is inexpensive (less than $50 a year) and often overlooked by the agent.
7. Your jewelry or other valuables may not be insured. Most policies limit the amount of coverage for lost or stolen jewelry to no more than $2,500 – and that's after your deductible's applied. For additional premium, you can insure your jewelry for its full value at a $0 deductible.
You can insure collections of just about anything. Whether it's sports memorabilia, old movie posters, or wine, your passion's included.
8 Your homeowner’s liability limit may be too low. Many home insurance policies carry a liability limit of $100,000 or $300,000. For less than $50 per year, this limit can be increased to $500,000, or even $1 million.
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