Real Estate Financing and Investing/How Good Is Your Homeowner's Policy

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All homeowners` policies do not offer equal protection. When a loss occurs, it is painfully easy to find out too late that a small extra premium could have saved you a large sum of money. You also may be missing out on money savings discounts that have come along in recent years. Time to find out is before something happens. Here are some tips:

  • Determine your insurance needs. The best figure to use is the replacement value, the amount it would cost to rebuild, excluding land. Your minimum protection should be 80% of replacing your house.
  • Know the basic policy from the broad policy. Look for the broadest coverage for the dollar. But for maximum peace of mind, choose the "all risk" form. Compare the cost of each form.
  • Find out if in case of loss, you will be paid based on book value or replacement cost. Do not be surprised when you file a claim only to learn that policies that promise "actual cash value" are actually referring your original cost minus depreciation over years of use.
  • Make sure potential calamities are covered. Fire and storm damage will be included, but damage from ice and snow may not be.
  • Look into a floater policy for furs, jewelry, silver, personal computers theft protection for such valuables may be limited.
  • Consider a umbrella liability policy. A lawsuit over an accident on your property or away from home could wipe you out.

Note: Umbrella protection is written over an underlying homeowners` policy and an auto policy. It takes over when the liability limits on these policies are reached.

If your homeowners` policy covers liability up to $50,000, an umbrella policy can cover you from losses in excess of $50,000. You can achieve substantial savings by accepting a higher deductible (e.g., $250 or $500 instead of $100).

  • Realize discounts by installing dead bolt locks, smoke detectors, and fire extinguishers. See what other discounts they can offer you in what ways.
  • Keep pictures of your valuables and personal belongings.
  • Review your insurance at least once a year, to make sure your coverage is keeping pace with inflation.

When You Have to File a Claim...[edit]

  • Report any theft or vandalism to the police.
  • Immediately call your insurance agent.
  • Protect your property from further damage.
  • Save all receipts for reimbursements.
  • Make a list of damaged articles.
  • Review the settlement steps outlined in your policy. In case there is a significant difference between what the insurer offers and what you believe you are entitled to, submit the dispute to arbitration.

Recommendation: If you are unhappy with your experience with the insurance carrier (e.g., delay in receiving payment. inadequate reimbursement), "shop around" for another insurance company.