Is Basic Homeowner's Insurance Basically Inadequate?

 By Catherine Powell

Owning a home is for many of us the single biggest investment we’re likely to make.  Even if you only own a 1-bedroom condo or starter home, you probably want to make sure that it and everything contained therein is protected against any unforeseen calamity.  Should a fire, storm, flood, or other act of God damage or destroy your home, wouldn’t it be nice to know that your policy will be sufficient to repair or rebuild it to the current building codes?  You bet it would.  Wouldn’t it also be a blessing if you were able to replace all the furnishings as well as your possessions if you were the target of thieves or a pipe broke only to cause major damage inside your dwelling?  You better believe it.  If all you currently carry is basic homeowner’s insurance, you could find that you have less protection than you really need.

1.      How much would it really cost to rebuild your home? –While the property coverage portion of your policy should theoretically pay to replace your home if it was completely destroyed, depending on the limits and exclusions your policy provides, this isn’t always the case.  In the first place, the policy doesn’t take into account things like your current property value or the cost to build your property to current building codes.  If it’s been years since you’ve assessed the real cost to rebuild your home, now is the time to talk to your insurance agent.   Secondly, a basic policy doesn’t address all the ways in which your home can be damaged or destroyed.

2.      How your home is damaged is as important as how much. – While most people assume that they’re covered should their home be damaged by wind and weather, what many don’t realize is that some acts of God are excluded from a basic policy or carry higher than normal deductibles.  If your home is destroyed by floodwaters, this requires a separate flood policy which you may or may not have.  If you live in states that are prone to hurricanes, you may come to find that instead of paying a flat deductible, should your home be damaged during a hurricane, the deductible could be increased to represent between 1-10% of your home’s value.  This means that instead of paying say a $1,000 deductible, you could be on the hook for much more.  The same goes for hail damage if you live in a state that’s more than usually prone to the phenomenon. 

3.      Detached Structures – Even if your dwelling is sufficiently protected, that doesn’t necessarily mean that the rest of your property is as well.  Does your home have a detached garage, a garden shed, a gazebo, a pool, a dock, or a deck?  These are what is known as detached structures.  Depending on your policy, these structures may be excluded from coverage or woefully underinsured.  Or, if you rent your garage out to someone else or convert your shed for business use, you may come to find that this invalidates the coverage you thought you had.  Any time you alter the use of any outbuildings, you need to discuss the matter with your agent to make sure that you’re fully insured.  5.

4.      What’s in your home is just as important as what’s on your property. – While the dwelling in which you live is important to maintain the lifestyle to which you’ve become accustomed, so too is its contents.  Remember, storms, fire, and floods can do more than damage or destroy property.  They can also ruin furnishings, carpets, cabinets, electronics, collectibles, and personal possessions.  If you’ve acquired a lot of nice things over the years, you may wish to increase the amount of personal property protection you currently carry.  This fact is particularly true if you have a lot of expensive jewelry, artwork, or other collectibles. You should also note whether the protection is listed as a replacement cost if you want to be sure you’ll be able to buy a comparable item should it be stolen or destroyed.  

5.      Where will you live while your property is rebuilt? – Even if your property is fully insured, there is one other expense that you’ll have to deal with should you be forced to vacate the premises while repairs are made or your home is rebuilt.  That’s the additional cost of living.  The sad fact is that many homeowners misjudge the amount or duration of additional living expenses they’ll need to sustain their current lifestyle should they be forced from their home.  As a result, they underestimate the amount of money they actually need.  One of the biggest mistakes most folks make is to assume that it will cost exactly the same to live away from home than it does to live in their home.  That could prove to be a costly error.  If you’ve owned a home for decades, you probably don’t realize what it now costs to rent a home.  You also probably think that the cost to feed your family is going to be the same living elsewhere as it does now.  If you’re forced to eat out more often, this could affect your monthly budget.  So too can storage fees, pet boarding, additional commuting expenses, and more that can quickly add up.

6.      How much personal liability protection do you really need? – That depends on how much you’re now worth.  It also depends on how the damage is done.  The liability portion of your homeowner’s insurance is there to protect you from lawsuits initiated by anyone injured on your property.  This means if a neighbor slips and falls in your home and you suddenly find yourself being sued; you’re covered up to the limit you chose.  You’re also covered should you or a family member damage someone else’s property. If you have dogs, you should look into adding an animal liability endorsement.  Speaking of adding, if all you currently have is a $100,000 limit on liability protection, you should consider boosting this to $300,000 or $500,000 to protect your assets.  Your insurance agent can help you determine how much personal liability protection you realistically need.

7.     Is there a doctor in the house? – If not and someone is injured while on your property, you’ll want to make sure your Coverage F is up to the task.  With a basic homeowner’s policy, this portion of the coverage can be set as low as $1,000.  This means if a guest is injured, you’d better hope that any medical treatment they require costs $1,000 or less.  If not, the remainder will come out of your pocket.  Being able to reimburse an injured party for the cost of their medical expenses could also spell the difference between winding up in court or not.  Considering the negligible cost to boost Coverage F to $10,000 or $25,000, increasing this coverage could be the best prescription you ever filled if you should need it.

 Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more ways to save on flood insurance, check out her website at http://aplusallfloridainsuranceinc.com/