Homeowners and Renters Insurance Check-up

Thursday, August 7, 2014

File this topic in the “dull but important” category: checking on your home insurance.

While not as painful as a dentist appointment or a trip to the DMV, spending time looking into your homeowners or renters insurance is not exactly on anyone’s top ten list of fun things to do. However, checking on your coverage shouldn’t take long and could save you money in the short term if you find a less costly policy and in the long term if you eventually must make a claim. Insurance agents recommend an annual check-up on your coverage, particularly if you’ve made any major purchases in the past year or any accomplished any major home improvement projects.

Home inventory
Whether you’re a homeowner or renter, if you haven’t done a home inventory yet, this is the best place to start looking into your insurance coverage. Both renters and owners need to know what they own and the approximate value of everything they have in order to buy an appropriate amount of insurance coverage. While no one wants to think about the possibility, if a fire destroyed everything you own, you’d want insurance to provide not just the value of your old items but the funds to replace everything. Insurance companies often suggest that homeowners have personal property insurance equal to 40 to 50% of the home replacement coverage, such as $100,000 in personal property coverage on a $200,000 home.
Most insurance companies offer a template for customers to do an inventory. You can always do a pen-and-paper version, but it’s best to do one online or at least send a copy to someone else for safekeeping so that you don’t lose your inventory along with your possessions. Know Your Stuff is a free online inventory service provided by the Insurance Information Institute. Know Your Stuff has a free app for iPhone and Android phones that you can use to modify or add to your online inventory and to add photos directly from your phone.
A side benefit of doing an inventory is that as you go through your belongings you may decide some things are not worth keeping and you can start a discard and donate pile to help declutter your home.

Special coverage
Keep in mind that while you’ll have a lump sum of coverage for most of your belongings, you may want to purchase special coverage for jewelry, art, furs, silver and collectibles. If you have a lot of high tech electronics in your home, that too may require extra coverage. You can discuss your needs with an insurance agent. If you live in a designated flood zone your lender will require you to buy separate flood insurance, but even if you don’t you may want to look into the possibility of buying this coverage to protect yourself from a storm-related flood. Go to the FEMA site for more information on flood insurance.

Liability coverage
Both renters and homeowners insurance include liability coverage to protect yourself and your assets if someone is injured on your property. If you have a swimming pool on your property, entertain often or have children playing at your home frequently, you may want to pick a higher level of liability coverage.

How much insurance to buy
Renters are typically only buying coverage for their personal possessions and some liability coverage; homeowners need to buy insurance to cover both of those needs along with the rebuilding of your home. An insurance agent can help you estimate your needs based on your home size, construction materials, the location and more. If you upgrade or expand your property it’s important to consult your insurance agent to see if you need to increase your insurance coverage.

Deductibles and discounts
You can typically get the biggest drop in your premiums by taking a higher deductible, but be sure you can comfortably afford to pay that deductible if you must make a claim. While a lot of consumers opt for a deductible of $500 or $1000, you may want to look into the trade-off in terms of savings on your premiums for a deductible of $1500 or $2000. You can ask for discounts based on bundling with your auto insurance, having a security system and sometimes for membership in an alumni group or affiliation with a particular employer, too. An annual evaluation of your home insurance needs provides peace of mind that your home is protected.