There are a few important things to consider when insuring your home. Keep these things in mind:
- Know what type of roof coverage your insurance provides. Not all insurance companies are created equal. Most will offer full replacement cost for a roof newer than 15 years old. Roofs older than 15 years are usually replaced on an actual cash value basis. Translation, they depreciate the value of the roof forage. Some companies are generous and only depreciate the material, not the labor, to a maximum of 50% value. Other companies can be aggressive and devalue an older roof to a fraction of the actual replacement cost. Imagine having a claim and finding out that only 25% of your roof replacement is covered!
- Chances are you do not have enough water and sewer backup coverage. Most people, if they have the coverage, only have $5,000. Chances are that will not even cover the clean up especially if you have a finished basement. The reason it is so low on a lot of policies is that it is a cost factor and clients and/or agents minimize the coverage to get to the premium they want. There are better ways to control premium and provide sound coverage.
- Ordinance or Law coverage is usually a mystery to the layman. This coverage provides a specified percentage of protection for the undamaged portion of the house. The insurance companies are only required to repair what is broken or damaged. This leaves a gap in coverage if during the rebuilding of your home after a claim requires updating of systems or bringing the home up to modern building code. If your home is relatively new 10% may suffice but if your home is 50, 60, or 70+ years old we always throw in more coverage because chances are the local building department will have something to say about outdated technology, grandfathering, or outdated fire requirements.
- Named or Broad peril coverage is also a sneaky way to limit an insurance company’s exposure. Read your policy! If any part of it says named peril, ask questions. Named peril is a limiting coverage while Broad peril is much better. Broad peril basically covers anything that is not specifically excluded in the contract.
- Watch out for replacement cost on personal property. Some insurers insure your belongings as actual cash value instead of the replacement cost. You want replacement cost. You lose a television you buy a new one of like kind and quality and the insurance pays as such. With actual cash value, the insurance company will only pay the current value of that television. Imagine only getting $800.00 for that 65” LED TV you bought two years ago for $2800.00!
- Watch out for sub-limits on special things like guns, jewelry, tools, and collectibles. I can not stress enough why it is so important to have a great agent to work with to make sure what you care about most is covered as you want it to be. Often these are the little differences that make all the difference!