If you own a home, chances are high you have homeowner’s insurance, as going without likely puts you at risk of a life-altering financial risk. Consider this scenario, if your home and all of its contents were completely destroyed, could you or would you have the financial resources to replace it at your own cost? While you are not legally required to insure your home, lenders can legally require it. Even if you’ve already paid off your mortgage and any HELOC (home equity line of credit), it’s best to keep your policy coverage in force in case of damage or other types of loss.
Property Damage
A homeowner’s insurance policy covers the listed peril, the industry term for an event that damages your home or belongings. Common peril examples include lighting strikes, wind or hail storms, fire and smoke, theft, and water damage (more on that one later). Your dwelling in the structure plus attached items such as a deck or garage. The policy also offers coverage for other structures on your property, like a shed or fence. We hope you experience these events are few and far between, you’ll be relieved to know your insurance policy has the right coverage should you ever need to rely on it.
In the case of these disasters, we recommend a grab-and-go box that holds all your important documents in one convenient place. If you need to vacate your home quickly, you’ll have all your important documents with you, safe from whatever calamity might befall your property.
When Your Home Is Not Livable
Most homeowner’s insurance policies include additional living expenses coverage. This coverage reimburses should you and your family need to reside elsewhere if your home is temporarily uninhabitable due to a repair or being rebuilt. Depending on the length of time spent away from your home, this coverage could reimburse a hotel, a home rental, meals, and more. The coverage only applied when the damage was caused by a covered peril.
If the Walls Could Talk
If you happen to live in a home attached to another, such as a condo or a townhome, the structure of the home itself will be covered by the homeowners association (HOA).
Your homeowner’s insurance covers your personal belongings and/or any improvements done inside. Homes that have undergone renovations such as a kitchen remodel or upon replacing original finishes with higher-end options like expensive flooring or custom tile work run the risk of becoming underinsured. Keeping good records of the interior improvements is a vital component to ensure your coverage levels are correct post-improvement.
Rob Barbine, a member of Team Trabert powered by The Rhoads Group, recently suggested owners obtain a copy of their HOA’s policy each year, then send over the entire policy, not just the certificate of insurance, to their insurance agent. A great agent reviews your policy, along with the HOAs, to ensure you’re adequately covered. He advised that HOA policies frequently have higher deductibles, often upwards of $25,000.
Special Coverage that Could Save your Wallet
Don’t let your wallet get soaked by water damage. Most home policies cover water damage from a burst pipe or water heater if it’s accidental, but not if it’s caused by a defect or normal wear and tear. When the water damage is due to a flood or water backup from sewers, that damage is unlikely to be covered.
In cases of special coverage, it’s best to talk with your agent. Team TraBert recommends water and sewer backup coverage at a minimum of $25,000. Another special coverage is service line coverage which is for the service lines (pipes) that run from your home to the street. The jurisdiction where you live only covers pipes to the street curb. From the curb into your home is your responsibility as the homeowner. If tree roots grow into your water line, this insurance would cover these instances. The coverage itself is inexpensive, yet it’s often overlooked or cut from a policy altogether to save a few dollars.
To File a Claim or Not
Don’t involve your insurance company for small claims. If the out-of-pocket cost is less than your deductible, suck it up and pay for the repairs yourself. TraBert suggests a $2,500 deductible or higher. Setting higher deductibles keeps most insured from filing low-dollar claims, which hurts your claim history.
Filing more than two claims in five years puts you at significant risk of being dropped by your current insurer. You are also likely to face challenges finding a new carrier. Again, only file claims that will be difficult or impossible to pay yourself.
Do not pose hypothetical or potential claims with your insurance carrier, as this will be logged as a “zero deductible claim” and will count against your claims filing history.
At the end of the day, keeping your policy records secure and knowing how to file a claim will be detrimental in the event of any emergency or natural disaster that damages your home.
At Organized Instincts, our seasoned team of daily money managers helps you track the value of your home’s improvements inside and out, helps you and your insurance agent review your policies coverage at every renewal, and allows you to sleep well as any of those perils approach. Schedule a free consultation today, for there really is no place like home.