Many homeowners believe their homeowner’s insurance policies will cover them for practically any damage sustained to the house or contents. The reality is that homeowner’s policies contain many exclusions and restrictions on coverage that can leave you with a coverage gap. Here are five common myths about homeowner’s insurance.
1. Loss-of-Use Coverage
If you have damage to your home severe enough that you cannot live in it while it is repaired, you likely expect the insurance company to put you up in a hotel while the work is being done. However, that is not necessarily the case. Not all policies include a loss-of-use provision. If you have to pay for a hotel, meals and other services out of pocket, it can add up quickly and put you at financial risk. If loss-of-use is covered, it will be stated explicitly in your policy, along with any limits of coverage.
2. Replacement Cost
Replacement cost in a homeowner’s policy refers to valuing the loss at the amount it will cost to replace the item. For example, if your four-year-old computer is lost in a fire, replacement cost coverage would allow you to purchase a new one with similar features. Most homeowners believe that is what will happen if they have a claim, however, the bulk of policies do not carry this clause. If not included, losses will be valued at what they were worth in their condition before the loss occured. The four-year-old computer might be valued at $250 – not enough to purchase a new one. Replacement cost clauses are a valuable inclusion in a homeowner’s policy.
3. Flood Coverage
Almost all homeowner’s policies exclude flood coverage, along with earthquakes and other natural disasters. Floods can occur from a number of causes, such as hurricanes, burst pipes or sewer backup. A flood is one of the most common causes of home damage and the destruction of contents. There are companies that specialize in flood coverage, and, if you live in a susceptible area, look into having a separate flood policy. Your mortgage company may require this additional coverage as well.
4. Termites
Termites live all over North America but are most destructive in Southern climates where their lifecycles are not impacted by cold weather. Termites eat wood – lots of it – and can eat the supports in your house as easily as fallen leaves in the forest. They live in large colonies and, collectively, can destroy the structure of your home. Repairing termite damage and eradicating them can cost thousands of dollars. Most policies exclude termites and other pest damage. If you live in a susceptible area, the best insurance is to have the house regularly checked and sprayed by a professional. You may want to consider an annual termite contract from a reputable pest control company.
5. Valuation of Loss
When you have a home insurance claim, the insurance company will send out an appraiser to determine the extent of the damage and the best way to fix it. The appraiser will assess a value to the loss which will be the minimum the insurance company can pay in order to meet their contractual obligations. However, you do not have to take that value as final. If you can prove your loss should be valued higher, you can negotiate the settlement with the company. Keeping receipts and pictures of valuable items will help you back up your claim.
The Bottom Line
To really know what is in your homeowner’s policy, you should read it thoroughly. Look for exclusions to coverage and decide how you will cover those risks. In some cases, your insurance company will have separate add-ons that they can attach to your policy or you can get specialized insurance from another company. For those risks that cannot be insured, analyze how you will financially cover those risks if they should happen.
Now that summer is just around the corner, we all need to start thinking about securing our home, especially when on vacation. Here are a few basic tips for helping you keep your home secure.
Always Lock Doors and Windows
It sounds simple, but it’s very easy to leave doors and windows unlocked, especially if you are just slipping out to the shop for a few minutes. Unfortionately, this provides a classic opportunity for thieves.
Most burglaries are a result of a door or window being left open or unlocked. If your property doesn’t feature good locks, you can purchase high quality locks from any do-it-yourself store near you. Not only will this make your home more secure, it will also act as a strong deterrent as high quality locks send out strong signals that you are taking your home security seriously.
Don’t Leave Keys In View
Make sure you do your best to keep your keys out of sight, especially from unwanted individuals. If you have a key rack positioned near your front door, try moving it out the way. Some burglars gain entry by ‘fishing’ your keys off the rack. You also need to make sure you don’t have any keys left outside in hidden locations. Some people like to leave a spare key outside. Not only is this convenient for you, it’s also very convenient for anyone who wants to get into your home.
Think of Some Deterrents
There are ways to give the impression to potential intruders you’re still at home when you’re away overnight such as using timers for lights and radios. Also security lighting and visible burglar alarms are likely to put off any thieves as there will be more chance of them getting caught. It’s important if you do have security lighting, that it is placed in appropriate areas such as doorways and access points to the house.
Also, having a dog can be a good deterrent for burglars, especially if your pet does not welcome visitors. Potential burglars will not proceed to try and get into the house if they feel any attention will be drawn to them. In addition, you should close your curtains at night so burglars cannot see any valuable goods.
Most insurance companies will offer you additional things you can do to lower your risk of a burglary. After all, they want your home to be as secure as possible… they insure it.
Some Final Tips
To make you feel safer, if you have a solid door, you could get a ‘spy hole’ installed in your door, similar to what hotel rooms have, so you can see who is approaching the front of your house. Also, you could get a chain fitted to your lock so even if the intruder was able to get the door open, the chain would prevent them from forcing their way through. Furthermore, remove any garden tools or equipment lying around that could be used by burglars to break into your home, and check your home’s surroundings for anything that may help conceal a burglar.
It may sound far-fetched but shrubbery or bushes you have around your house are helpful for intruders to hide, so perhaps consider changing your home’s garden exterior to prevent this from happening. Also, reach out to the community and discover if you have any neighbourhood watch schemes or start one up yourself.
With summer vacations coming up, start thinking and planning now, and decide ahead of time if you need to make any adjustments to your home to make it more secure, especially while you’re away.
One part of the housing market experiencing a rebound that will probably continue even if the rest of the market remains sluggish is remodeling.
A recent report by the Joint Center for Housing Studies at Harvard University predicted that remodeling would rebound strongly this year after a three-year downturn. Annual growth in remodeling is expected to be around 8 percent.
In fact, the study found, the remodeling market held up far better than housing construction during the recession, with annual spending still close to $300 billion. But as the market for renovations picks up, it may be a good time to consider the problems that could arise.
A group of leading insurers said renovations are a constant source of large claims on homeowners’ policies. And among claims, fire is the most common cause.
Whether the homeowner wants to add a new kitchen or repair years of neglect, the cause of renovation problems is the same. Homeowners are concentrating on the outcome, not on managing the process. Any homeowner planning a sizable renovation should hire a contractor, for efficiency and safety, insurers say.
The one constant bit of advice from insurers is to tell them about your renovation before you begin it so they can tell you what to look out for and, of course, increase your coverage.
But the best policy is still vigilance. The top thing to monitor is oily rags, which strike fear into the hearts of risk assessors. These rags catch fire easily if they are not disposed of properly. The solution is to make sure the rags are put in a locked, fireproof box at the end of each day.
Second on the risk list is the debris from the welding and soldering equipment used on roofs or for installing plumbing and electrical wiring. A common disaster, Mr. Raphael said, happens when a pipe is welded but no one checks to see if any solder has fallen onto the debris below. It can smolder for hours and catch fire later that night.
Thinking about the disasters that can befall your home for the sake of a nicer, updated bathroom may put a damper on some people’s enthusiasm. It can be scary, but if certain things are done, it can be fun and successful.
Three-quarters of families are unprepared for natural disasters. Stow some water and non-perishable food, and protect your home from power outages and flooding with these 4 projects:
1. Add Emergency Power
A portable generator keeps essential electrical items running during blackouts: from your heat, refrigerator, and key lights to your Internet and cordless phones. It’s a small gas-powered motor on wheels you start with a lawnmower-like pull cord and jack into a receptacle in an exterior wall of your house.
Make sure your electrician installs a transfer switch, which disengages the utility power when you connect the generator.
Average cost – $1,000 to $2,000, with wiring
2. Keep Electronics Safe
When the power comes back on after a blackout, it often comes with a rush of electricity that fries any silicon chips in its path. You probably have plug-in surge protectors for your computer and home theater, but nowadays there are also expensive-to-replace computer controls inside kitchen and laundry appliances and heating and cooling equipment.
A whole-house surge suppressor will shield everything. Choose one that accepts phone and cable wiring too, because surges can come through those lines as well.
Average cost – 500 to $800, including installation by an electrician
3. Set Up a Flood Fix
Heavy rains and snows — as well as plumbing and gutter problems — can fill your basement or crawlspace with water, causing a big mess and destroying belongings stored down there.
Protect yourself with a sump pump, which sits in a hole in the basement floor and automatically turns on when that pit fills. The best units include an alarm to alert you to flooding and a second, battery-operated pump that kicks on if the primary one stops working.
Average cost – Cost: $500 to $1,000 for a new installation; $800 to $1,000 to add battery backup to a new or existing pump.
4. Be Ready to Evacuate
What if you need to get out quickly? A home survival kit contains critical supplies such as thermal blankets, water-purification tablets, waterproof matches, and a Swiss Army knife. Add some cash, toiletries, and a week’s supply of prescription medications, and you’ll be prepared for most anything.
Average cost – $100 to $150 for a family of 4
Have any other steps you would add to this list? We’d love to hear your comments. Just use the “comment” link below to sound off.
With the recent Japanese quake and subsequent stories about the vulnerability and possibilities of similar disasters striking here in the U.S., many homeowners are wondering about protecting their primary asset, their home, should a large earthquake hit their region.
Whether you should or should not have earthquake insurance is a conversation you should have with your insurance agent who provides your homeowners’ coverage.
When considering earthquake coverage three questions to consider are:
- What exactly are you protecting
- What is your deductible
- What will be your cost
1) What exactly are you protecting? How much equity do you have in your home? Are you upside down? Do you have ten or fifteen percent equity in your home?
2) What is your deductible? Most insurance companies offering earthquake coverage have very high deductibles, usually 10% or 20% of your coverage. If your dwelling is insured to rebuild for $200,000 then your deductible is either $20,000 or $30,000 in these cases. Does this exceed your equity in your home? If so, do you feel it worth the cost to pay not only premiums but also a deductible to rebuild your home given the current value? If your home is valued at $450,000, you owe $415,000 and your deductible is $20,000, do you feel it makes sense for you to get earthquake insurance? A difficult question to answer.
Finally, if there is partial destruction of your property, but not complete, the cost to repair may be just beyond your deductible, say $30,000 to repair some damage as the house was not a complete loss to the earthquake.
3) What will be your cost? Premiums depend on a myriad of factors, as most insurance premiums do. Type of home, zip code, deductible, etc., all factor into your premium. The analysis of premium comes down to how much it is worth to you per year to insure how much equity against how much of a deductible? It is a risk-benefit analysis that only you can answer, with the assistance of your insurance professional providing the costs and deductibles.
If your premium is around $500 per year and you have significant equity you may decide there is a good value in obtaining a policy. If your premium is over $1,000 per year, you have little equity and a large deductible you may feel the value of the policy is not worth the premium. And should your home undergo significant destruction in an earthquake, are you comfortable walking away from the home and the mortgage(s)?
There is no set ‘yes; or ‘no’ answer to ‘should I get earthquake insurance?’ Every situation is different and every family’s comfort level of risk and benefit is different. Answering the question however is a valuable exercise and one every homeowner should engage in annually when reviewing their insurance coverages.