The recent fires in our area bring to my mind the importance of homeowners insurance. During my 19+ years of selling real estate in and around Boulder homeowners insurance has never been a big part of the transaction. Years back it was a last minute detail, many times lined up the day before closing. Now there is a specific deadline on the contract in which the buyer has the right to cancel the contract if reasonable (in the buyers subjective opinion) homeowners insurance is not available for the property they want to purchase. Usually this contingency period is 10 – 14 days after an accepted contract.
Most people think about insurance in two ways. For 99% of the time they want to know they are covered without paying too much (that’s why the save 15%… commercials have mass appeal). Having coverage brings peace of mind. Once you have a claim your perspective changes. If you have good coverage you are thankful and if you don’t you kick yourself for being cheap. Just think of the 166 families who have come home to their home and possessions which are now a pile of ashes. The pit in your stomach is deep enough without the nagging fear that your coverage is lacking.
So, with this in mind I asked my friend and insurance agent Ryan Brooks from Allstate to give some quick tips on making sure you are adequately covered. Here are a few tips:
- Don’t just shop for the cheapest plan out there. Yes it will save you on a monthly basis but this approach is penny wise and pound foolish. In case of a catastrophic loss you could be lacking some important coverages.
- The best scenario in setting up a policy is to sit down with an agent (not online) and go over your specific situation. Ask questions and tell them about your personal situation. Do you have art, expensive jewlery, memorbilia? Telling the claims adjuster after a fire will not fly, it needs to be disclosed in advance.
- Here are a few items that you want to make sure you have on your policy.
- Cost of Living – this coverage gives you money to live in a home of similar size and quality while your home is being re-built or repaired. If you don’t have this coverage it can quickly cost you tens of thousands of dollars.
- Adequate Liability Coverage – Make sure you have enough liability coverage. In most cases this is $1,000,000 or more. This covers you if someone would slip and fall off your deck during a party, etc.
- Building Codes Coverage – This coverage is especially helpful in the case of an older home. This allows for modification of the house to meet current code if the covered repair needs to be re-worked in order to meet code. Think of an old home with a steep pitched roof.
- Condo Coverage – If you are a part of a homeowners association there is most likely a master HOA policy which covers the structure. However, this policy does not cover the individual owners possessions, or the interior finishes (drywall, plumbing , cabinetry, carpet). Make sure your condo insurance has adequate building structures coverage which will rebuild the interior of the unit. Many times this is capped out at 10% of the contents coverage and this is not enough.
- Loss Assessments – Speaking of condos. Loss assessments coverage covers you if a covered loss (roof, liability) on the part of the HOA results in a special assessment. This coverage runs around $10 a year and is well worth it.
- Sewer and Groundwater – Losses from sewer backup and water coming into the home are not usually covered unless there is a specific rider on the policy.
- Personal Property – Make sure the limits on your policy grow over time. The amount of personal property a typical household has grows ever time. We have much more in our home when we are 60 years old than when we were 20.
Once good insurance is in place you can rest easy. Many pay insurance their whole life and never take out, but for those who have a significant loss, insurance is well worth it.
Tip: Take an extensive video of your home, including closets, drawers, garage etc. and store either online (private Youtube) or in a safe deposit box. This will be a good inventory of personal property and will allow you to remember items that would have slipped your mind. Everything has value make sure your homeowners insurance is up to snuff.