I’d like to talk about some specific areas of your Homeowner’s Policy to focus in on that may need your attention. These are some things that I most commonly find are not adjusted frequently enough to address policyholders’ changing needs.
1. Dwelling Value
Does the amount of coverage shown accurately and realistically reflect what it would cost to rebuild your home using today’s material and labor costs? Often we see that people have not increased their dwelling coverage to keep pace with increasing reconstruction costs or they have done upgrades and improvements without increasing the coverage.
2. Deductible Options
One sign that a policy has not been updated in a while is when the deductible is unnecessarily low. While we never want to see a deductible so high it would create a financial hardship in a claim situation, it is not uncommon to see a $250 or $500 deductible when the policyholder could comfortably cover the first $1,000 or $2,500 of the loss. Taking advantage of higher deductibles can result in substantial premium savings or can be used to offset an increase in coverage as discussed above.
3. Scope of Coverage
Are you familiar with the type of property coverage your policy provides? There are several options available and the types of claims they respond to vary widely. Some examples are Special Form, Broad Form, and Basic Form. Without going into too much detail here, you should know what your policy provides and how a claim would be handled. The same is true for Replacement cost versus Actual Cash Value coverage.
4. Occupancy
A standard homeowners policy almost always anticipates owner occupancy as a requirement for coverage to exist. We sometimes see situations where owners have moved out of their dwelling for one reason or another and it is occupied by a tenant, a friend or a relative. This situation can substantially affect coverage if the policy is not updated to reflect current occupancy and can even result in a claim denial.This is also true of business use of the property. If the dwelling described on the policy is not your primary residence or if you or anyone is conducting any kind of business at that location, be sure to contact your representative to update the policy. Business use can include home day care: B&B and AirB&B, pet sitting and seasonal rentals.
5. Named Insured
Is the named insured on the policy actually the titled owner of the property? It seems like a strange question, but we’ve seen many situations where a property has been put into a trust, been gifted to someone else or even sold on a private mortgage or similar arrangement and the insurance is not updated to reflect that. Once again, this can have a major impact on how a claim is handled even to the point of outright denial.
6. Liability Limits
One of the biggest “bang for your buck” areas on this policy is increased liability limits. In many cases the limit can be increased from $300,000 to $500,000 or even $1,000,000 for less than $100 per year. This is one of the best uses for applying the savings provided by increasing deductibles as we discussed earlier. Keep in mind that once the liability limit on the policy has been reached, not only is there no money left to pay the liability claim, the company can no longer represent or defend you either. Be sure that limit is adequate.
7. Miscellaneous
Finally, I would like to briefly bring a few things to you attention that are often overlooked:
If you have recreational vehicles, atvs, utvs, motorcycles or boats, never assume your homeowners policy provides coverage for them either in a property or liability claim. While some of these can be endored onto the policy, that coverage is typically not provided automatically.
There are limits built into the policy for coverage on certain valuable items. Jewelry, cash, antiques and collectibles are some examples of this. If you have valuable items like this in your home it’s always best to check on the coverage provided and whether higher limits are available.
While the homeowners policy does not provide coverage for flood, many offer an endorsement that does provide coverage for water damage under certain circumstances and limits. A common one is Backup of Sewers and Drains which would typically provide $5,000-$25,000 of coverage for water damage that results from a blocked drain, sump pump failure or sewer line rupture. This is not provided in the policy as a rule and you would be surprised at how often these claims occur!
That’s a brief outline of some key coverage areas to focus on and familiarize yourself with.
I hope you find some of this helpful. I wish you a Happy New Year and look forward to a much improved 2021!
