Tuesday, August 30, 2011

4 Tips For Making Sure Your Insurance Is Up To Date

Here on the East Coast of the U.S., we recently were rocked by an earthquake and a hurricane within the span of less than a week.  Hopefully all of my intrepid readers out in cyberspace who live in the affected areas made it through without incident.  In the run up to the hurricane, there were a lot of articles with advice on how to prepare for an emergency.  However, making sure your insurance is updated is something that you have to do far in advance of an emergency.  Many insurance companies won't even issue new policies or updates if there is an impending event.  By the time something is impending, it is too late.  Therefore, it is better to make sure your insurance is up to date before you hear about the next disaster on CNN.  In other words, now is the time to do an insurance checkup.

1. If you are a renter, get renters' insurance

Many renters assume that if their apartment burns down that their landlord's insurance will reimburse them for their loss.  Not true.  Your landlord's insurance will reimburse your landlord for the loss of their property - not yours.  If you want to protect yourself against the loss of your personal belongings, you need to buy your own insurance.  Fortunately, renters' insurance is relatively cheap.  Your first stop should be to the same company through which you have your car insurance.  You might get a discount for having multiple policies.

2. If you are a homeowner, make sure your coverage amounts are up to date

Almost all homeowners have insurance to cover their property and belongings.  Primarily, this is because mortgages require it.  However, many people don't bother to keep it up to date.  The coverage amounts that you had when you bought your house may not be enough ten years later.  It may cost more to rebuild your house now than it did ten years ago.  You may have added an addition, upgraded your kitchen, remodeled your bathroom.   If your coverage amounts don't reflect this, you're going to be in trouble if you need to avail yourself of that coverage. 

Most insurance companies make it easy to update your coverage amounts.  Usually you give them the current characteristics of your house, and they will give you an estimate of how much it would cost to rebuild your house.  Some good insurance companies will even be proactive and ask you periodically if you need to update your coverage.

One thing to keep in mind, however, is that the appraised value of your house may not be the amount of coverage you should buy.  Your appraised value includes the value of your land as well as your dwelling.

3. Make sure you understand your policy's limits and exclusions, and buy extra coverage if necessary:

The biggest exclusion (and the one which affects those affected by the hurricane) is that your homeowners' policy does not cover flood damage.  Flood damage is covered by a separate policy aptly known as flood insurance.  The same insurer who sold your homeowners' policy probably can also sell you flood insurance.

Likewise, most insurance policies don't cover earthquakes either.  If you want earthquake insurance, you will have to buy an add-on to your policy.  Usually earthquake insurance policies have high deductibles, so they will pay in the event of a total loss but not if you just have incidental damage.

Insurance policies also have other limits and exclusions.  Some of the more common ones are limits on claims related to loss of jewelry, computers, collectibles, and other higher value items.  For instance, my policy limits what they will reimburse for jewelry is $10,000.  Therefore, if you have any items which exceed any of these limits, you should consider buying a separate policy to cover the additional value.

4. If you are considering changing or adding to your policy, do it when the sun is shining:

Many insurance companies have waiting periods from the time you buy the insurance to the time it goes into effect.  The most common one is the 30 day waiting period for flood insurance.  That means that you shouldn't expect to rush out and buy insurance just before a disaster the same way you can buy bottled water or D-cell batteries.  You need to buy the insurance that you need when the sun is still shining.

The old adage "be prepared" applies not just to making sure your pantry is stocked, but also to your insurance is up to date.  The time to prepare is now!


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