Homeowners Insurance Review
Analyzing your homeowners insurance policy is simple when you know which items to focus on. Reconstruction cost of your home may be the key starting point to a quick and painless review!
Home owners typically buy insurance for two reasons; either to protect their asset or to satisfy their mortgage obligation to insure the home. For obvious reasons, insurance carriers have great respect for home owners who buy insurance for asset protection rather than simply as an obligation.
Home insurance is primarily based on the reconstruction value of the property; once the reconstruction cost is obtained, the home insurance company will view risk assessment questions in order to surcharge or discount the risk; accordingly, the homeowners insurance quote will be released.
Whether prospective clients have dogs, a swimming pool with diving board, a trampoline, any prior claims, fire sprinklers, monitored home alarm system, the original year of construction or type of roof are all examples of rate relevant questions which assess the risk involved. Some answers may adjust the price of insurance and other answers may disqualify the property from being insured by the respective carrier.
Whether you are buying new homeowners insurance or simply reviewing your present home insurance policy, we have a few points for you to consider.
Homeowners Insurance Checkup
Homeowners and homebuyers alike have different names for the review; some call it an annual home insurance checkup, some call it a policy review and some call it ‘due diligence’! Nonetheless, if you value your home, your personal belongings and your risk of liability, perhaps you should pay a few minutes of attention every couple of years to make sure that your insurance covers your interest.
- Is the Dwelling Limit on your policy sufficient to reconstruct your home following a total fire loss?
- Are your personal belongings adequately covered in the event of a total loss?
- Do you have any High Value articles in the home which may not be covered without separately itemizing them as ‘Scheduled Property’? (i.e. Artwork, Jewelry, Silverware etc…)
- Have you reviewed deductible options for your to fairly assess your appetite for risk?
- Do you need Flood Insurance?
- Do you need Earthquake Insurance?
- Are you taking advantage of Protection Device discounts? (I.e. monitored alarm, sprinklers etc…)
Summary Points – Homeowners Insurance
60% of homes in the United States are under insured in some fashion; perhaps the Dwelling, the Other Structures or high value belongings in the home which the homeowner assumes are covered.
When insuring a home, it is important not to use the market value as either a guideline or expectation of insurance coverage limit. Homes are insured on reconstruction value and nothing else; the sales price of homes fluctuates by market indicators. In a depressed market, reconstruction may cost much more than sales price; where in a flourishing real estate market, homes will sell for much higher than reconstruction cost – it is important not to involve market price in any way when insuring your home, it truly has no bearing.
If you have a mortgage on your home, be sure that the correct mortgage company, address and loan number is listed on your policy; if the correct mortgagee is not listed, the mortgage company will not receive their copy of the policy which could flag the mortgage company to provide forced insurance at a much greater cost.
Finally, it is important to stay insured with a reputable and trusted insurance carrier; taking short cuts, discounting coverage and saving a few dollars could be an extremely expensive mistake in the event of a claim; after all, homeowners insurance is meant to provide financial assistance in response to a catastrophic event.