June 18th, 2014
You’ve had your home for a little while, and everything seems stable and happy. Not that we want to rain on your parade, but you may need to update your homeowner’s insurance.
How do you know when it’s time to update your insurance policy? Generally speaking, significant upgrades to your home or changes in your life mean it’s time to do an audit of your policy’s coverage.
When you buy home insurance, you don’t base your coverage limits on what you paid for the house. Instead, you buy enough dwelling coverage so that you can rebuild what’s likely your largest investment in case it is destroyed by a covered event such as fire or wind.
Factors taken into account in arriving at the replacement value of your house include the size of the house and local construction costs.
Insurance providers then consider the amount of risk presented by a particular home and policyholder. Again, location is important: It determines the types of threats a home can face. For example, it costs much more to insure a home in California than it would for a similar house in a region with fewer earthquakes, mudslides and fire storms.
One thing that’s not a consideration is the land that comes with the house. In most cases, events that could destroy a house leave the property under it relatively unscathed. You still own it.
Before you have contractors and subcontractors in your home, consider what would happen if one of them fell and sued you personally for their injuries?
Homeowners insurance liability limits generally start at about $100,000, but some experts recommend that you purchase at least $300,000 worth of protection. If you want even more, consider purchasing an umbrella insurance policy, which provides broader coverage and higher liability limits. In many cases, you’ll save money on the coverage by purchasing an umbrella policy, “regular” policy and auto or life insurance from the same agency.
Because the contents of your house will either increase or decrease, you will want to update your insurance coverage accordingly.
Take an inventory of what you have and estimate the value if you had to replace it. Insurance generally covers 50-70% of the amount of insurance you have on the structure of your home. So if everything is worth $100,000, you’ll get $50,000 – $70,000 coverage. You can get additional riders for very valuable items.
You know Fifi Gorgonzola Chou wouldn’t hurt a fly. But unfortunately, the statistics are out there. When you get a dog, you should get additional dog-bite liability coverage.
Typically, homeowners insurance policies cover dog-bite liability as part of the standard coverage. But if your limit is $100,000 and the claim costs you $300,000, you’re responsible for that $200,000 – whether it’s legal fees or damages.
Since the personal liability coverage available through a standard homeowners policy isn’t always enough, the institute advises dog owners to consider purchasing a personal excess liability policy, otherwise known as a personal umbrella policy – or PUP.
Talk with your insurance agent about your coverage and areas where you think you need to make adjustments.