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As your housing risks change, so should your coverage.

Looked at your homeowners insurance policy lately?  Very possibly, no. In a sign of how little attention this coverage gets, nearly a quarter of homeowners surveyed by Insurance.com in 2018 said they'd never even read their policy.  But even is you studied the fine print when you bought your policy, over time there may be home renovations, rising building costs and changing housing codes.  To be sure that you neither underinsured not overpaying, check if any of these situations apply to you.

You build an addition: The cornerstone of a homeowners policy is what's known as dwelling protection: the maximum amount of money you could receive to replace the structure of your home should it have to be completely rebuilt.  But too often, people who renovate their homes - adding on a first floor master suite, for example - don't adjust their policy to suit the higher replacement cost.* Construction costs are no doubt higher than when you bought your first policy years ago, and specialized spaces, such as a bathroom or kitchen, cost more to rebuild than basic living space.  Ask us to reassess your property to make sure your coverage is adequate. (Also make sure that you have sufficient coverage for your personal possessions.)  Note that if your home is damaged, most insurers won't fully reimburse you for repairs unless you've insured your home for at least 80 % of its value.

Standards have changed: The older your home is the greater the change that it doesn't satisfy upgraded building codes, such as those meeting standards for resistance to wind in Florida.  The usual replacement cost coverage generally doesn't include the extra coverage of meeting codes adopted after your home was originally built.  So you should add on building code coverage (also called building law or ordinance coverage) if you might have to comply with new requirements.

You inherited your mother's jewelry: Standard homeowners insurance policies usually have limited coverage, often $2,000 or less for your jewelry.  An instructor at the American College of financial Services recommends that you cover your valuable items, including jewelry, with a separate personal articles policy, which is designed to protect against not only theft, but also other mishaps, like losing a ring while swimming.  If the value of an insured item has little relation to the original price paid, you should get it appraised. In other cases, original receipts along with a photo or video of the item may be sufficient.

You are increasingly worried about natural disasters: floods, tornadoes, wildfires, hurricanes, you name it.  Fire - wild and otherwise - and wind damage are usually covered under a standard policy.  But flood damage, including the kind that may come with a hurricane, is likely excluded.  So if you live in a flood zone, consider purchasing flood insurance.  The cost of coverage varies, but on average it's $700 per year for a primary residence. ** 

You downsize to a condo: If you're insuring a condominium unit, the key thing to know is what type of insurance your homeowners association (HOA) has in place.  At minimum, it might be a type called "bare walls" which basically covers only the shell of the building around your unit.  At most, it might also cover improvements or additions you've made to your unit.  Once you know the HOA's level of coverage, you can buy a condo insurance policy that dovetails with your HOA's.


*Derek Klock, a Virginia Tech professor and coauthor of the Process of Financial Planning.

** FloodSmart.gov

Posted 1:15 PM

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