Is Your Home Adequately Insured?
For most people, a home and its contents are their most valuable assets.
To protect them, it’s important to be sure you have sufficient homeowner’s
insurance. If it’s been a while since you’ve assessed your insurance needs,
it may be time to reexamine your coverage. That’s particularly true if real
estate values have risen in your area or if you’ve made major home
improvements, according to the Iowa Society of Certified Public Accountants.
Review Your Policy
Unfortunately, when a disaster occurs, homeowners often find that their
insurance coverage isn’t adequate to cover all their costs. To ensure that
doesn’t happen, review your policy when it comes up for renewal, after a
major addition or renovation, or when you’ve installed a new burglar or fire
alarm system. You should also do so after a life change, such as marriage or
divorce, when the contents of your home may change.
Picking the Policy
CPAs recommend that you consider what kind of repayment you want to receive
for damages. A cost-value policy will reimburse you for the price you paid
for an item. However, the insurance company will depreciate that price based
on the age and condition of the item, which means you’ll likely receive less
than you need to buy a new replacement. Replacement cost coverage is more
expensive than a cost-value policy, but it will provide you with the amount
you need for repairs or replacement. A guaranteed or extended replacement
cost policy pays whatever is necessary to rebuild a home as it was before a
disaster, even if that amount is more than the policy limit. Insurance
companies may place limitations on any policy, so find out precisely what
your policy promises. Remember, too, that if you live in a flood zone or in
an area subject to frequent hurricanes, it may cost more to cover these
catastrophes.
Create an Inventory
If disaster strikes, it’s helpful to have both written and photographic
inventories of the contents of your home that you can use to back up your
insurance claims. They should include all home contents–furniture,
electronics, artwork, and collectibles–along with estimated replacement
values. Ask the insurance company if you need a separate rider for valuables
such as jewelry, art, antiques, and computers. Be sure, too, that the
company is aware of new additions or renovations to your home, which may
expand the square footage that must be covered or raise the value of the
property. In your policy review, make sure that it reflects overall changes
in real estate values in your area. The same is true of any possessions
whose value may have increased since they were first insured. You may need
to call in an appraiser to determine the current worth for your home or its
contents in order to change your policy.
To speed the process after a disaster, make sure your policy, insurance
company contact information, and the written and photographic inventory of
the contents of your home are readily available. It’s best to keep them in a
secure spot away from your home, such as a safe deposit box or with a
relative who lives nearby.
Shop Wisely
Don’t hesitate to shop around for the best rates. While adequate insurance
is important, you may be able to find a better deal for the same amount of
coverage. However, check that the insurer you’re considering has been given
good ratings by ratings agencies such as A.M. Best or Standard & Poor’s or
by a consumer watchdog such as Consumer Reports.
Choosing the best policy and ensuring you have the proper coverage can be
complicated. Your CPA can advise you on many personal finance decisions,
including getting the right coverage for your home.
Access “Find a CPA.”
