Tips & Trends - 03/2005

Home Insurance

It is one of the things we don't want to think about. But what would you do if your home were to be destroyed by fire or some natural disaster? Even a small fire or flood can do enormous damage. How do you replace and rebuild? Do you have the necessary insurance coverage?

Replacement Cost Insurance will pay you the cost of replacing the damaged property without deduction for depreciation. However, it is limited to a maximum dollar amount. An Actual Cash Value policy is one where the policy holder receives an amount equal to the replacement value of the damaged property minus depreciation. Unless your policy specifically states that property is covered for its replacement value, the coverage is for actual cash value.

A Guaranteed Replacement Cost insurance policy will cover the cost of rebuilding your home from the ground up, excluding the value of the land and foundation. This kind of coverage can also include miscellaneous costs, such as clearing the site for rebuilding. It also gives you protection against a sudden increase in construction costs.

Your replacement costs may or may not reflect the market value of your home. Be sure your policy takes into account the current building codes. It is usually illegal to over-insure, but it is a big mistake to under-insure. Adequate insurance coverage will help you get your life back on track after a storm, fire or burglary.

You'll also want adequate coverage for any personal property that may have been damaged. Keep an accurate record of your possessions. Get a pad and pen and take a walk into each room of your home. List the contents as you move through, writing down serial numbers when applicable.

Take pictures and videos of each room and store this information in a safe place. Inform your insurance agent of valuables that may be stored in your home or items of unusual value, such as antiques or jewelry. It's best to protect important documents and valuables in a safety lock box.

There is very little most of us can do about natural disasters but always follow the safety tips for your area. As the saying goes, 'Batten down the hatches,' when necessary. If your home has a fireplace, be sure the last coal is out before retiring for the night. Smoke detectors in each room can and do save lives. Test these devices twice a year to make sure the batteries are working. Keep lighters and matches where small children cannot reach them.

You can lessen the likelihood of burglary, especially when you're away on vacation, by making a potential thief believe your home is not an easy target. Timers on lights and radios, motion detectors on outdoor lighting and a Beware of Dog sign are some good tips. Keep your garage doors closed and locked. When all the windows have the shades drawn tight, it is a clear signal that no one is home. So, open the curtains, at least partially, and place a lamp or tall plant so no one has a clear view of the interior.

You might also want to start a neighborhood watch program. And let your neighbors know when you're going to be away for any length of time. Have someone collect your mail and newspapers.