Now that we’re mostly dug out of the recent snowstorm, I find myself remembering a friend whose home was damaged due to freezing conditions. That difficult event was made worse for her because her agent had neglected to give her proper coverage, selling her a condominium policy when she actually lived in a town house. A mistake she lived with for more than 25 years without knowing! The out-of-pocket expenses she had to bear were higher than they would have been with the correct policy.
Aside from these out-and-out errors, there can be other gaps and oversights in your homeowner’s insurance that can cause problems later on if they’re not caught now. A few are listed here, but you might consider meeting with your insurance agent to ask questions if you have any doubts or have made any changes recently in your living situation.
Actual Cash Value versus Replacement Cost: Which are your belongings covered for? The answer can affect how much you receive, especially if you are insuring older items. To understand the difference, imagine your three-year old laptop was damaged when your basement flooded. Brand new, it may have cost $2,000, but its value on the day of the flooding had depreciated to $700. With actual cash value coverage, you would only receive $700 – enough to buy another three-year old computer – but with replacement cost coverage, you would receive the $2000 needed to buy a new, similar computer.
Undervaluation: The popular home design magazines and websites seem to frequently feature makeovers and remodelings intended to boost the value of your home. The expense of the bathroom redesign will ideally be exceeded by the increase it gives to the sale price of the home. What many homeowners forget, however, is to adjust their policy to cover the increased value of their home. If anything happens to the house before it is sold, you will want your homeowner’s insurance to cover the investment you made in making the improvements.
Primary residence: If you plan to move out of your home while still owning it (examples include relocating for work or moving into an assisted living facility), your coverage for the house may immediately cease. It’s vitally important to call your insurance agent as soon as you know you will be moving out. Together you can both find a policy that will protect the value of the building for as long as you own it.
Home Business Insurance: Your regular homeowner’s policy may cover the medical expenses your brother incurs if he slips and falls on the ice in your driveway while paying you a visit. However, if your visitor instead is the FedEx person, and his delivery is related to your home business, then the cost of his medical care may not be covered. Home business owners will find that they have special insurance needs, and they should decide which type of coverage will suit them best. A rider to their regular homeowner’s or renter’s policy will not cover medical expenses if a visitor or delivery person is injured, but if they work alone and handle all of their correspondence online, it may be enough. An in-home business policy covers injury liability and the cost of more equipment. If you need to protect against an even higher level of loss, consider a business owner’s policy instead. This field is complicated, so call up your agent to learn more.
Renter’s Insurance: Not all homes are owned by their occupants! Your landlord should be paying for the coverage of the house or apartment you are renting, but your insurance needs don’t stop there. If a fire or some other calamity should occur, causing you to lose your furniture, clothing and other possessions, would you be able to replace everything out of pocket? If not, take advantage of the low monthly cost of renter’s insurance to protect yourself if you need to replace your things. Putting together a home inventory can save you money by helping you calculate how much coverage you really need (a good idea for homeowners as well).
Fine Art, Jewelry and Other Special Items: Your policy will have a cap on how much it will pay out for your belongings, but if you own any artwork or jewelry of unusually high value, your policy may not be sufficient to cover its loss from theft or damage. You may receive enough coverage with a fine art floater added to your policy, or you may need to turn to insurers who specialize in protecting art. These specialists will also be familiar with the risks involved in transporting art that other insurers may not know.
This is a long list of potential gaps, and there are probably more beyond this. Contact your insurance agent to see what coverage you may be missing. That’s what they’re there for, after all.
Bill Primavera is a Realtor® associated with William Raveis Real Estate and Founder of Primavera Public Relations, Inc. (www.PrimaveraPR.com). His real estate site is www.PrimaveraRealEstate.com, and his blog is www.TheHomeGuru.com. To engage the services of The Home Guru and his team to market your home for sale, call (914) 522-2076.