Natural disasters – storms, wildfires, floods, high winds – are striking North America at unprecedented rates and homeowners’ insurance premiums are matching that steep uptick. “Most homeowners have noticed they are paying more to insure their properties,” says Wayne Merlino, Owner, Paul Davis of Palatine Illinois. “But they haven’t reviewed their coverage recently so they aren’t sure exactly what they are paying for. They assume the carrier will do whatever is necessary if a disaster hits.”
That’s a mistake, Merlino says. Paul Davis sees underinsured property damage victims every day whose coverage didn’t include storm flooding, or failed to anticipate unexpectedly high materials costs for replacing damaged property, or fell short in different common ways. You can sidestep this awful realization by reviewing your homeowners’ policy yearly. Ask these five questions as you review:
Is my coverage adequate? Good coverage includes replacing the structures and its contents, replacing your belongings, reimbursing living expenses while your home is not habitable and paying damages for injuries incurred on your property. Tip: Ensure your coverage level is based on current replacement costs for rebuilding the structures and not based on appraised value. With simple research, it’s easy to determine typical replacement costs per square foot.
What isn’t covered? Ask your representative to tell you exactly what is covered and what is not. Many homeowners policies do not cover flooding, for example – you must buy it as a separate policy. Others exclude earthquake and landslide damage. Nearly all require special arrangements for rare or valuable possessions such as art, musical instruments, wine collections or historic memorabilia.
What’s my deductible and how is it calculated? Many carriers are revamping deductibles, changing them from maximum dollar amounts - $1,000 per incident, for example - to percentages of a home’s value, typically from 1 to 10 percent. Discuss what these changes could mean for your pocketbook if you make a claim.
Did my premium go up? Compare how much you’re paying this year to how much you paid last year. Ask why the difference – did prices go up due to higher costs in the insurance market or did your risk profile change? You may wish to ‘comparison shop’ and see what other carriers can offer at more competitive prices.
What more can you do for me? Many carriers offer bundling – insuring your home and autos, for instance – that can reduce your costs. Additionally, agents can recommend measures – installing a security system or adding storm shutters, perhaps – that may further lower premiums.
If you don’t like the answers to these review questions and your current carrier can’t address your concerns, ask for price quotes from other insurers, advises Merlino. “Since you likely haven’t looked at your policy in a while, you probably haven’t tested the market lately, either,” he says. “Carriers, just like any company, offer new insurance products that may save money and deliver more, too.”