For many Americans, owning a home is an essential part of the American dream and one of the most important investments you can make. As your family grows, your needs for insurance will change as well as your risk. Reviewing your insurance program every year to make sure it still meets your needs is a critical part of owning a home and shouldn’t be overlooked.
Compared with investment decisions and estate planning issues, perhaps questions about the language in your homeowner’s policy may seem hardly worth considering. However, the more successful you become, the more complicated your asset-protection needs are likely to be, and the more you might have to lose.
Lucky for consumers, there are insurance agents out there to help with the process. As a homeowner, elect to choose an agent that can review options and help walk you through the complicated policy languages to ensure you are protecting your assets and your family.
The following will be a few things to consider while researching policies and agents to help protect your family. This list isn’t comprehensive, but hopefully, it’s enough to start a dialogue with your agent. And, maybe, just maybe this will be enough to encourage you to deal with a person rather than an online chat machine.
- Gaps in the homeowner’s coverage. Every homeowner needs to review their coverage regularly to keep up with rising replacement costs. But ensuring different kinds of homes in different locales poses extra challenges. If you buy insurance policies from more than one carrier (or agent), you may face contrasting rules, limitations, and policy renewal dates. From a rental home in a beach town (think Airbnb) to a ski lodge in Aspen to your home in St, Louis, each location could have different underwriting requirements. It’s good to work with one agent that is familiar with all carriers to ensure that limitations aren’t restricting coverages (i.e. rental use, wildfire risk, hail/roof payouts).
- Under insuring art and collectibles. Standard homeowner’s policies limit coverage for the losses of antiques, furs, jewelry, and other valuables. While you could schedule additional coverage, ensuring the real value of a collection of contemporary art or vintage muscle cars, likely will require a specialized policy addressing several critical, unique qualities of those collections. Whether it’s a Ferrari or a Picasso, you’ll need more than what’s offered in a standard home insurance policy.
- Make sure you keep up with the true replacement cost of your home. Often people let this go for a few years, but it can be devastating. This is especially important if you’ve recently undergone any home renovations. Within some homeowner’s insurance language, you could potentially be penalized if your home isn’t within 10% of the dwelling replacement cost limit. It’s a great idea to review the policy coverages and languages on an annual basis. Some policies automatically include an inflation protection endorsement, but it won’t always provide enough of an increase if there have been major remodels or renovations done.
- Forgetting to insure household employees. When someone works for you or your family as a nanny, landscaper, personal assistant, or in another role, you could be liable for medical expenses and lost wages if the worker is hurt on the job. If payment is being rendered for a job that’s being completed, talk to your agent to ensure that there aren’t any gaps in potential coverage
- Running a business out of your home. Regardless of whether this is your primary source of income or a secondary business, running it out of your home poses additional risks. Business equipment coverage, inventory coverage, and even liability coverage should be discussed and reviewed with your insurance agent.
- Not having enough liability insurance. The liability coverage that’s offered in your home insurance policy doesn’t only cover the liability risks that occur at your home. As an example, if you have a travel trailer that is being pulled by your pick-up truck, as soon as it’s unhooked, the liability then falls under your home insurance liability coverage. If you’ve parked your trailer at a campsite and you get sued because someone tripped up your stairs leading into your camper, the liability from your home would be your line of protection.
Another example – the liability on your home policy will offer coverage in the case of your dog jumping out of your backyard. If he were to attack someone while out on his run, the liability would be on you – your homeowners’ policy.
- Focusing only on the cost. The cost of a policy is very important, and it does need to be considered. But, focusing only on the cost and not paying enough attention to the policy coverages can be very tragic in the case of a loss.
Most insurance carriers now offer optional coverages that need to be looked at. Service line coverage, for example, is a newer option that should not be missed. In the recent past, water back-up was the coverage that was available in the home insurance policy. This coverage would apply to the damage to the repair that was necessary for and under the home. The service line coverage has now been introduced by many carriers. This will help in the case of the pipes between the home and the street, so if the front yard had to be dug up, it would now be a covered peril and not 100% out-of-pocket for the homeowner
And, let’s take a second to talk about Homeowner Associations. They could potentially assess mega payments to homeowners within the association. Another optional payment that cost just dollars over the year but could save you THOUSANDS should the HOA assess this to its members!
- Filing unnecessary claims. “That’s what I pay for when I pay for home insurance,” Unfortunately, many homeowners have thoughts just like this.
Homeowners insurance can help pay for damage if there is a water leak from frozen pipes if there is a hail storm and your roof gets destroyed if your home gets burglarized and wrecked, plus your furniture and big-screen TV get stolen, and even if you are a little too ambitious in the kitchen and forget about the lit burner as you’re (literally) throwing in the towel onto the stovetop.
As insurance agents, we encourage the home insurance to be used for catastrophic claims that would devastate the homeowner if they had to pay for the damage out of pocket.
Far too often, we get notified of claims that our policyholders have filed that may not be considered catastrophic. Even though it would be a huge inconvenience, if you lose your $3000 wedding band, for example, we would have you think twice before you file a claim with your homeowners’ insurance policy. Yes, it’s an expensive and terrible loss, but sometimes filing claims end up costing the homeowner more in the long run. As claims are filed (and on the record for five years), there are repercussions for them. Some are forgiven (think hail) but some claims make the homeowner look like an increased risk. Increased risk means a higher premium – until the claims roll-off. So, the homeowner is “paying” for the claim repeatedly.
These situations have been just some examples of optional coverages and liability scenarios, but hopefully, they are enough to cause homeowners a pause when comparing insurance policy quotes. In addition to reviewing quotes, let us also encourage you to review agents. A few extra bucks a month could alleviate future headaches and stress. Also, if nothing else, we hope that it’ll encourage our clients to have these conversations with us.
We believe our greatest asset is the relationship we build with our clients and we are dedicated to being the right choice for all of your insurance and financial needs. We take our jobs seriously when we’re given the opportunity to help protect our clients. We have seen how lives can be impacted by having the right level of insurance in place.