When was the last time you reviewed
your homeowner’s insurance policy with your agent? How do you know that you are adequately covered by
your current policy?
Most homeowners are underinsured,
says Tamara Norton, personal lines broker
at Westland Insurance Brokers Inc. Why?
Because in Orange County, property values
have increased dramatically over the past
few years, so most homes may not really
be covered for their full market value. Not
only have homes increased in value but the
price of building materials and labor is up
as well. As the monetary value of your
home and material goods increase, so
should your insurance.
“It is of the utmost importance to review
you homeowner’s policy each year with a
professional insurance broker,” says
Norton. “A complete risk analysis should
be conducted to make sure you are properly protected.”
Smart Business spoke to Norton about
common mistakes that occur with insurance coverage and how you can properly
protect your home and assets in your home.
What are common homeowner’s insurance
problems?
Homeowners are often lulled into complacency because they have ‘guaranteed
replacement’ or ‘extended replacement
cost’ policies. These policies sound as if
they provide an owner with full coverage
for rebuilding a home regardless of the
cost. Unfortunately, true guaranteed
replacement policies are rare. Most insurance companies cap payouts at 100 percent to 150 percent.
For extended replacement to be effective, a home must be insured 100 percent to
value. If reconstruction costs then run
over, you have an additional 25 percent to
50 percent payout to rebuild your home. If
your home is not insured to value, you may
have coverage gaps that leave you underinsured without the money necessary to
rebuild your home.
Homeowners also rely on the personal
property limit on their policies to fully replace all belongings. But there are specific policy limits on specialty items like jewelry,
fine arts, furs, guns, coin collections and
antiques. These items need to be scheduled
on your policy to properly protect them.
What steps should homeowners take to
ensure they have adequate coverage?
You should contact a broker to talk about
the types of coverage necessary. A broker
will then conduct a complete property
evaluation, including detailed information
on the home’s construction, square
footage, number of rooms and inside features. For higher-valued homes, the insurance company usually will send out a professional appraiser without charging an
extra fee. Then, based on all that information, a replacement cost estimate will
determine the cost to rebuild your home
should a total loss occur.
Communication is necessary. Any time
work is done to the home, you should contact your broker. If you’re about to remodel a kitchen or change floor tile to hard-wood or marble, you need to contact your
agent before work even starts.
Always work with an A-rated carrier. For
company ratings, you can visit the Web site
A.M.Best.com. You also want a carrier that
can provide you with the type of coverage that meets your individual needs. These
needs should be determined from the risk
analysis.
Do consumers have any other coverage
options that offer more protection?
In today’s world, everyone should have an
umbrella policy, which protects your liability over and above your current liability limits on automobile and homeowner’s policies. It provides protection when seemingly
minor accidents turn into major legal liabilities. These policies are very inexpensive.
What are some effective ways to reduce policy premiums?
The best way is to use the same provider
for all policies. Consolidation provides
multiple discounts on all policies. Purchasing your homeowner’s, automobile and
umbrella policy with the same carrier
makes sense and saves time and money.
Another way to reduce premiums is by
increasing your policy deductible. Most
homeowners today are increasing deductibles to $1,000, $2,500 and more. You
would be surprised how much lower your
premium will be by simply increasing your
deductible.
How can homeowners protect against natural
disasters such as earthquakes?
The truth is, not many homeowners carry
earthquake insurance. Now, with property
values higher than ever, it is crucial to be
protected. We do not know when an earthquake will occur, but we know it will happen. These policies are a necessary investment when you consider the alternative.
Without this protection in an area such as
California, a 15-second natural disaster
could wipe away all the assets and memories for which you have worked your entire
life. This type of protection is worth the
peace of mind it offers.
TAMARA NORTON is a personal lines broker at Westland
Insurance Brokers Inc. Reach her at [email protected] or
(949) 553-9700.