How to Save and Avoid Risk
Tax season is a great time to reexamine your financial risk with your insurance adviser. You may be wasting money on unnecessary coverage or not realize where you are vulnerable to serious losses. Because there are so many types of insurance available, consumers should sit down with a reputable insurance professional who can help sort through some of the confusion. Solid advice from a Trusted Choice® insurance agency may save homeowners thousands of dollars by outlining which kind of coverage suits them.
A comprehensive homeowners policy may even eliminate the need for other smaller, more specific personal insurance policies. Here are a few key issues you should consider discussing with a knowledgeable independent agent.
At Risk: How Could You Be Underinsured?
Home-based business: At least 60% of in-home entrepreneurs are not properly insured, according to an IIABA study. Of those inadequately protected, nearly half didn’t realize they were at risk because they thought their homeowners insurance covered them. While a basic homeowners policy will cover a computer used at home for personal use, it won’t protect entire home-based firms.
For example, homeowners’ policies typically provide $250 for computers off-site and won’t cover lost data or business liability. That leaves many people who use laptops for business and other entrepreneurs vulnerable.
Valuable collectibles: “Standard” homeowners’ policies usually provide coverage for the “contents” of a home at 50% – 70% of the value of the house. So, people with extensive collections of silver, antiques, jewelry, dolls, etc. should consider additional coverage to protect these sentimental treasures. But the best way to buy this type of coverage is from the home insurance company—an “endorsement,” which is cheaper than a stand-alone policy. (For instance, a person with $100,000 coverage on their home will have its contents insur ed to $50,000. If that same person has $30,000 in antiques, that will significantly subtract from coverage for the rest of the home’s contents, such as clothing or furniture.)
Many policies also contain “sub-limits” for certain types of contents. For instance, most limit theft coverage on jewelry to $1,000 and firearms to $2,000. Those with more va luable jewelry, gun, or other collections should consider additional protection.
No replacement cost coverage on their property: Replacement cost coverage is 10 or 15% more expensive, but it replaces the item(s) with like kind and quality. Many standard home insurance policies provide replacement cost on the structure, but only “actual cash value” (ACV) on the property. ACV is the actual cost to replace the item, minus depreciation. With replacement cost coverage, a $1,000 TV set bought eight years ago would be replaced with a similar type of TV, regardless of depreciation.
Children in college: An IIABA national survey showed that 80% of college students who rent housing for the school year may not have adequate coverage to protect their belongings when away from their primary residence. Incidentally, it also revealed that one-in-seven college students lack health insurance coverage and that an alarming 85% of families thought their health insurance would cover a college student studying overseas for more than a month. In fact, most health policies do not extend abroad and families need to know they may be underinsured in that area.
Home remodeling: Home renovation can leave homeowners vulnerable. One-in-four home remodeling projects increase the value of a home by more than 25%, but too few consumers consider increasing their homeowners insurance limits to reflect that increased value.
Most insurance companies require homeowners to insure their home to a minimum of 80% of its replacement value to be eligible for full coverage. If coverage falls below that level and the homeowner experiences a loss, they will be penalized with a partial settlement. In addition, many people don’t take basic steps to protect themselves from liability exposure while construction workers are in the home.
Consumers should always ask for a certificate of insurance from anyone employed in their home and seek advice from a good insurance agent.
Did You Know?
Renters insurance not only protects the contents of a rented property, but also almost always shields the policyholder from liability.And it’s not expensive (because you’re not insuring the building—that’s the landlord’s responsibility). A typical policy that offers $15,000 in property protection and $100,000-$300,000 in liability coverage can be as little as $150-200 a year.
Dog owners whose pets are known to be aggressive should never go without liability insurance or they may be in for a rude awakening if they get sued. Bites are by no means rare. Companies pay out about $1 billion in dog-related claims a year and estimate that one-third of all homeowners’ liability claims are due to dogs.
Insurance discounts are readily available for consumers who combine family policies, use one insurance company for several types of coverage, or take other measures such as using property theft deterrents or maintaining good driving records. Consumers should consult with an independent insurance agent at least once a year to evaluate changing needs and look for cost savings.
