Your home and personal belongings are meaningful and valuable assets. If a disaster strikes, having insurance for your property is the best way to have the necessary financial resources to help you repair, rebuild, or replace whatever is damaged.
More than half of all homeowners in the United States do not carry adequate homeowner’s insurance to replace their home and its contents should a catastrophic loss occur. Now, before a disaster strikes, take the time to:
- Document your property.
- Understand your insurance coverage and options.
- Insure for the hazards in your area.
You should review your policy annually to remind yourself of your coverage and to make any updates based on new purchases, renovations, increases in property value, or increases in costs to rebuild or replace items.
Not all insurance is the same. You may have gaps in your coverage that you’re not aware of. Consult with your insurance professional to make sure that your current policy is right for you.
Documenting your property
An up-to-date inventory can not only help you determine how much insurance to purchase, but will help you prove the value of the property you own, which could speed up the claims process. It can also help with tax deductions you can claim for your losses.
Taking photo and/or video to record your belongings is a good idea, but don’t forget to include vital information that will help determine value:
- Copies of receipts
- Appraisals for high value items such as jewelry
Store paper copies of your inventory in a waterproof and fireproof box, safe, or safety deposit box. It’s also a good idea to leave a copy with a trusted relative or friend. Secure electronic copies on a waterproof USB or upload them to cloud storage.
Understand your insurance coverage and options
Homeowner – A homeowner’s policy generally provides the following basic areas of coverage:
- Dwelling – Coverage for your house
- Other Structures – Coverage for garages, decks, and fences
- Personal Property – Clothing, furniture, electronics, appliances, etc.
- Loss of Use – Compensation if you need to relocate temporarily
- Personal Liability – Coverage for accidents that occur on your property
- Medical Protection – Payments for a person who is injured on your property
If you live on a farm, in a condominium or manufactured home – there are different policies for these types of residences.
Business – If you operate a business out of your home, you may need a separate policy. Always consult with an insurance professional before making costly assumptions.
In the insurance world, the cause of a loss (such as fire or theft) are called “perils.” Be sure to check your policy for the perils listed. A homeowner’s policy may provide coverage for different perils for the dwelling and for personal property. The policy may also have different deductibles based on the peril.
Most homeowner’s insurance policies DO NOT cover damage from earthquakes and floods. Coverage is typically available as a separate policy.
Learn what settlement types (payouts) are available for your dwelling and personal property and choose the one that best meets your needs. The cost of your policy and the claim amount you receive will vary depending on what you choose.
Replacement Cost – This is the cost to replace all belongings or rebuild your home at current market rates. “Guaranteed” or “extended” replacement cost policies account for pricing surges in supplies and labor after a major disaster. Note: replacement cost option may not be available for older homes.
Actual Cash Value (ACV) – Your insurance company will reimburse you by estimating the current value of your home and belongings, minus depreciation. For example: if you purchased your television 5 years ago, you would receive the estimated value of a 5 year old television. ACV is basically what you could get for an item if you sold it yourself at a garage sale or on eBay.
Stated Value – This is a pre-determined, fixed sum listed on your policy. No calculations, no estimates, just a fixed lump sum.
Qualifying for discounts
As your insurance professional about available discounts. Almost all insurers offer discounts for the following:
- Multi-policy discount (home + auto)
- Smoke detectors, dead bolt locks, burglar alarms
- Certain building materials (reinforced roofing, etc.)
- Senior discount
- Long-term policyholder
For additional information about preparing your home to better withstand disasters, as well as recovering, repairing, and rebuilding following disasters, visit the Insurance Institute for Business & Home Safety.