The insurance industry is a business. Understandably, policies can’t include everything or else selling them wouldn’t make the industry any money. On the other hand, the providers of homeowners insurance aren’t out to get you; believe it or not, they aren’t purposefully tricking you into signing onto coverage that lacks something that you may eventually need. Here are some loopholes for which to look out:
Summer Storm Damage
Many, but not all people, know the nuances of homeowners insurance in the summer. Flooding, not including wind-driven rain coming in through your roof, windows or doors, is not covered by your basic policy. Similarly, there is a lack of coverage for sewage backup due to heavy rain. When it comes to damage from fallen trees, it will usually be covered if it hits your house, garage or other insured structure. If someone else’s tree creates the damage, your insurance company may try to collect against their policy. That works both ways, however, so be diligent in your yard’s upkeep.
Undervaluation
According to Marshall & Swift/Boeckh, a provider of building cost information, 60 percent of homes in the United States were undervalued by an average of 17 percent in 2013. The reason for that surprising statistic is that homeowners simply don’t know to update your policy after making any renovations to your house. If your improvements increased the value of your home significantly, you may be left with a coverage gap if your previous coverage isn’t enough. Plan to review your policy yearly with your insurance agent; know you may need to increase coverage for home improvements or expensive new purchases.
Where You Reside
Did you know that if a disaster occurs while you aren’t currently living in the house you own, your insurance may not kick in? The fact is, once you stop living at the dwelling, coverage on the building may vanish. So call your insurance agent as soon as you have a plan in place to move elsewhere in order to obtain all the correct policies.
Reimbursement of Valuables
As you may know, all policies do cover your personal property to a certain extent, but these policies generally limit reimbursement for jewelry, silverware and collectibles, typically up to $1,000 or $2,500. Furthermore, policies only cover the items if they are stolen, not if they are lost or damaged. In the event of a robbery, insurance companies pay out actual cash value, depreciated based on the age of the item, rather than the current cost of a replacement item. Rider policies circumvent that hole, allowing you to collect the replacement cost if you file a claim, while eliminating the deductible and covering mysterious disappearances and breakages for fragile items.
Replacing Your Home
If a disaster occurs and your home is a total loss, your policy pays up to the dwelling limit, which for most insurers is 80 percent or more of the insurer-estimated cost to rebuild. That means that you often will have to make up the difference when rebuilding your home. To safeguard yourself, first make sure the estimate given is accurate and fair, but even before that, you should have an extended replacement costs on your policy. According to Jessica L. Anderson of Kiplinger’s Personal Finance, you can add 20 to 25 percent above the dwelling limit as an endorsement for about $50 a year.
Being a smart consumer applies when shopping for insurance coverage, as well as the rest of the world’s marketplace. That starts with doing your homework and being aware of what you have and what you will need.
