An annual check-up on your homeowners insurance can result in a healthier policy and a healthier pocketbook.
We’re talking about a homeowners insurance check-up, a task you should complete once a year, ideally around renewal time. This will ensure your policy still provides the right level of coverage for your family, and your premium isn’t costing you more than it should.
Remember, homeowners insurance is essential. The coverage is designed to protect your home and its contents, as well as shield you from liability for accidents and such on your property.
Block out an hour of your time, call an insurance agent, and get answers to these three important questions.
What Type of Coverage Do I Have?
The most effective type of coverage is known as “replacement cost,” which covers, up to your policy limits, what it would take today to rebuild your house and restore your belongings, says Jerry Oshinsky, a partner at Jenner & Block in Los Angeles who has represented homeowners in litigation against insurers.
“Extended” replacement cost coverage provides protection to your policy limit, say $500,000, and then perhaps another 20% of the cost after that. Percentages vary, but in this example you could recoup up to $600,000 on a $500,000 policy, assuming your losses reach that high. Extended coverage can compensate for any unanticipated expenses like spikes in construction costs between policy renewals. Now harder to find due to the industry shift toward extended replacement coverage, “full” or “guaranteed” replacement coverage covers an entire claim regardless of policy limits.
A less attractive alternative is “actual cash value” coverage that usually takes into account depreciation, the decrease in value due to age and wear. With this type of policy, the $2,000 flat-screen TV you bought two years ago will be worth hundreds of dollars less today in the eyes of your claims adjuster. Kevin Foley, an independent insurance broker in Milltown, N.J., favors replacement cost coverage unless you can save at least 25% on the premium for going with actual cash value coverage instead.
Even if you have replacement cost protection for your dwelling and personal property, don’t assume everything is covered. Structures other than your home on your property — such as a detached garage or swimming pool — require separate coverage. So too do luxury items like jewelry, watches, and furs if you want full replacement cost because reimbursement for those items is typically capped.