Homeowners: Make Sure You're Properly Covered

How certain are you that your home and belongings are adequately insured? According to a recent survey by the National Association of Insurance Commissioners (NAIC), most Americans feel they have the right amount of insurance coverage (72 percent), but only 33 percent say they understand their policies “very well.” Unfortunately, many homeowners do not realize they are underinsured until it's too late, when a loss either has occurred or is imminent.

When to Review Your Policy

Make sure you have the protection you need before disaster strikes. According to insurance experts, there are four events that should trigger a review of your policy:

• When your policy comes up for renewal. Take the time to review your coverage and discuss any questions or concerns with your insurance agent.
• Major purchases or alterations/improvements to your home. Policy endorsements may be necessary to insure any newly acquired high-value items such as jewelry or artwork. Also, if you have added onto your house or built structures outside your home such as a shed or swimming pool, these changes should also be reported to your agent.
• You have made your home safer. Policy discounts may be available to you if you have installed new alarm systems or upgraded heating, electric, or plumbing.
• Major lifestyle changes. Marriage, divorce, or adult children moving back into the home are examples of events that should trigger a coverage review.

How Much Homeowners Insurance Do You Need?

You need enough to cover:

• The structure of your home. This should be enough to cover the cost of re-building at current construction costs. Multiplying your home’s total square footage by local building costs per square foot, or using a cost estimator that many insurance companies provide, will give you an estimate of the amount of insurance you need. Replacement cost policies, which pay for the repair or replacement of damaged property with materials of similar kind and quality, are recommended.
• Your personal possessions. Most homeowners policies cover personal possessions for approximately 50 percent to 70 percent of the amount of insurance on a home’s structure. To determine if this is enough, make a list of everything you own and estimate what it would cost to replace those items. If you think you may need more coverage, talk to your agent. You may also need to purchase more or special coverage if you own expensive jewelry, artwork, or other items.
• The cost of additional living expense if your home is uninhabitable from damage. This covers temporary lodging, restaurant meals, and other additional living expenses incurred if you must live elsewhere while your home is being rebuilt.
• Your liability to others. This covers legal defense and damages if you or your family members are sued for bodily injury or property damage, subject to the terms of your homeowner policy. Most homeowner policies provide a minimum of $100,000 in liability coverage, but higher amounts are increasingly being recommended. If your assets are worth more than the liability limits in your policy, consider increasing your limits or purchasing an umbrella policy, which gives additional liability protection.

It is important to note that floods and earthquakes are not covered under standard homeowner insurance policies. Flood insurance can be purchased through the Federal Insurance Administration. For more information, visit http://www.fema.gov.

If you have not reviewed your homeowner policy in the past year, take some time to do it now. You'll have peace of mind knowing that your home is protected. A knowledgeable AAA insurance representative can help you plan for the coverage you need. Ask AAA today.

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