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“One Size” Does Not Fit All with Home Insurance

I was recently considering a “training” bike for my 2-year old grandson. Naturally, he is going to need the perfect Paw Patrol helmet to go with a perfect Paw Patrol bike. I decided to browse the web and noticed the majority of the helmets were “one-size-fits-all”.  Now, I don’t know a whole lot about bike helmets, but I can definitely tell you that a 2-year old’s head is a lot smaller than a 6-year old’s head and one-size certainly is not going to fit all.

Think of homeowners’ insurance in the same way. There is no “one-size” for insuring your home. In fact, according to FEMA, 64% of homes in the US are under-insured. In order to be certain that your home is properly protected, your insurance must be tailored to your specific home, your specific needs and your specific family. Below are just a few important questions to think about when evaluating your homeowners’ insurance.

Do you need REPLACEMENT COST or ACTUAL CASH VALUE Coverage?

  • Answer – it depends on what you want your claim payment to be if something happens to your home or stuff.
    • Replacement cost is the amount of money it will take to rebuild your home just as it was before it was destroyed, or to purchase new items if your old ones are damaged or stolen. Replacement cost insurance is not always the default option when buying home insurance. It is possible that you may have replacement cost coverage on the structure of your home, but your “stuff”, like electronics and furniture, do not have replacement cost coverage.
    • Actual cash value coverage is the alternative to replacement cost coverage. It will only pay for today’s actual value of your home and stuff. The actual cash value of your items is almost always lower than the replacement cost because things typically depreciate, or lose value, over time. For example, say you bought a television 5 years ago for $1000. The value of that same TV today maybe closer to around $100, meaning your claim payment would only be around $100 to buy a new TV. Something important to consider when thinking about needing to replace a 20-year old roof!

Do you need to tell your insurance agent about your dog?

  • Answer – YES!
    • If you have a dog or have welcomed a new dog into your family since last speaking with your insurance agent, you need to give your agent a call. Pets are covered under the liability section of your insurance policy. This policy section covers you if you are found legally responsible for some type of damage. Although we hate to even think it, every dog has the capacity to bite, especially in self-defense. Last year alone, dog bite claims made up around 1/3 of all homeowners claims and totaled over $600 million in claim payouts.  Because of the financial responsibility the insurance company takes on when insuring a home with a pet, many companies have specific stipulations regarding you and your dog.

Do I have automatic coverage for jewelry or other high value items?

  • Answer – you have some coverage.
    • Standard home policies typically have coverage for your personal property, but it is likely that there is a dollar limit set on how much it will pay for certain categories of valuable items like jewelry, firearms, cameras, art, etc. For example, there may be a $2,000 sub-limit on what your insurance policy will pay for jewelry, even though your overall personal property limit is much higher. So, if you were to lose your wedding ring and it is worth $1,000, you would probably be in good shape. But, if the lost ring was valued at $5,000, you would likely only receive a $2,000 claim payment to replace the ring.

Insurance can be a tricky thing to navigate. Find an advisor you can trust that will evaluate your specific needs and provide you with the peace of mind that you will be whole again when life does not go your way.