A clean bill of health – it’s not just for you and your ticker. Your insurance policy could use a yearly exam, too. There are many moving parts and changes in your lifestyle that could render more coverage necessary. Maybe it’s time to step outside your comfort zone and see other carriers. And when was the last time you took inventory of your home?
Here’s how you can get your insurance back to optimal health in five simple steps.
1. Do you have enough coverage?
Your home is your biggest investment. Make sure your insurance covers the cost of rebuilding it should it be destroyed by a covered peril.
Seek a second opinion
Your insurer will determine your home’s replacement cost. But there’s no reason why you shouldn’t double check the numbers. Use a homeowners insurance calculator but remember to factor in renovations or upgrades. If the numbers vary greatly either way, ask your agent to review the replacement cost he or she is using.
Earthquakes and floods
Standard home insurance doesn’t cover earthquakes or floods. These devastating events need separate insurance. Homes in regions prone to quakes and floods are at tremendous risk without coverage. A J.D. Power annual insurance survey in 2011 showed how much.
When Hurricane Irene struck the East Coast that year, fewer than 10% of homeowners had flood insurance. Standard policies can cover water damage from rain if wind causes structural damage. That same coverage doesn’t apply to rising water.
2. Shop around
Have you been with your carrier too long? Check your options at least once a year.
Where your car goes …
Who insures your automobiles? Check with that carrier about homeowners insurance. Or check with your home insurance carrier about auto coverage. You can usually get a discount if you buy both from the same carrier.
Don’t worry about jinxing yourself: Think about what could happen. Then, ask your agent. What if your neighbor’s tree comes through your window? What if someone steals your kids’ gaming consoles? What if you injure a neighbor by accident in a pickup basketball game – off your property?
Answers to specific questions can give you a clear idea of what coverage you need.
Look beyond the price
What good is bargain insurance if you have a problem when you file a claim? Check the track record of your carrier and every other carrier you consider.
3. Take inventory
Do you have an inventory of valuable items in your home? You should. Disaster comes in many forms, and without warning. It could be a storm or a burglary. You’ll find it much easier to navigate the claims process if you have a home inventory – a record of you possessions with photos, receipts and serial numbers.
Look for software that will help you document all this data in the cloud – in case the peril takes out your home computer, too.
What should it include?
Anything of value. Many homeowners inventory room by room. Include bikes, electronics and heirlooms. Don’t forget art, collectibles and jewelry. Inventory gaming systems and musical instruments, as well as any expensive sporting goods such as a set of golf clubs.
Seasonal items and tools, often forgotten for inventory, can be expensive to replace, so include them.
Now. Take inventory room by room. Include appraisal documents and model numbers. Photographs are perfect, but you can also videotape a room of inventory items. Narrate with descriptions, age, what you paid for items and what they are worth now. Share a copy with a family member outside your home.
4. Are you getting every discount you should?
Insurance carriers offer a number of discounts, but they vary widely by state. But if you do your homework, you can find you qualify for some major price breaks on your premiums.
Ways you protect your home could save you money. For example, you could save up to 10% or even more by installing a monitored home security system. Some carriers could grant you a price break if you install deadbolt locks.
Protection against peril
Add a hail-resistant roof or storm shutters, and some carriers may reduce your rates. Fire extinguishers or sprinklers to safeguard against fire damage also can deliver discounts.
Providers take fire prevention seriously – the average fire claim tops $33,000, according to the Insurance Information Institute.
Just be who you are
Retirees can get a discount because they’re home more than working people. That’s sometimes good for as much as 20% off. Have good credit? More carriers take credit score into account when setting rates.
Loyalty matters, as does timely payment of premiums. Carriers will reward you with discounts as you reach milestones. But make sure to compare these premiums to their competitors.
5. Consider whether you should raise your deductible
There’s a risk – but what’s the reward?
A deductible is the amount you spend out of pocket on a loss. Your coverage kicks in after the deductible has been paid. In general, the higher the deductible, the lower the premium. If you can afford to pay more when there is a claim, it makes sense to have a higher deductible.
If you suffer a loss due to a covered peril but don’t have the money on hand to pay your deductible, your claim is in trouble.
How much of a cushion is enough? If you have two months’ living expenses – a bit more for dependents – accessible, that’s a good start. But revisit this issue often to make sure your situation hasn’t changed.