March 29, 2016
If you own your own home, you get periodic (most likely once each year) notices to renew your homeowners insurance policy. Most of us take it for granted that our homes are covered for most risks. Here are a few things to think about the next time you get your renewal notice:
- Is your home insured if damage is caused by an earthquake? Seems like perhaps an unusual question if you live in the northeast, but we do experience earthquakes. And it may not take much to damage the foundation of your home. The vast majority of homeowner's policies exclude coverage for earthquakes, but you can add it to your policy. Your agent can tell you how much it would cost to add this coverage.
- Have you considered increasing your deductible in order to reduce your premium? Most of us carry low deductibles of $500 or less. But you don't really carry the insurance to pay for small claims – rather, most of us are worried about the big losses. By increasing your deductible to $1,000 or more, you might find a significant premium reduction. Often, the premium savings can cover the increased deductible exposure in a few years.
- Although not very prevalent today, one form of homeowners insurance is what is known as a fire policy or "named peril" policy. This type of policy only covers the specific risks enumerated in the policy. The more popular, and by far the most appropriate form of policy for most of us, is all risk coverage (known as an HO 3 policy) because it covers all risks, except for those specifically excluded (for instance, damage caused by an earthquake). Make sure you have an HO 3.
- Many homeowners buy coverage based on the lowest premium. But insurance is only as good as the carrier's willingness to pay claims. The low cost provider is not always the right option. The larger carriers like Chubb (now part of Ace) and Fireman's Fund (now part of Allianz) have excellent claims paying reputations. The more valuable your home and the more complex your coverage needs (art, jewelry, etc.) the more important it is to review your carrier's claims paying reputation to be sure the coverage you have matches the carrier's claims paying history.
- Finally, if you don't have an inventory of your personal property, especially valuables that are covered under you policy, you may find that filing a claim becomes near impossible. The best solution is to videotape your home and its contents. Depending on your carrier, you might be able to arrange an inventory through them. If not, there are services that provide a home videotaping and inventory. Make a few copies and store them in different locations.
Don't wait until you have a loss to find out whether you have the right coverage. Ask your agent for a review of your coverages to be sure you are well protected.