When’s the last time you reviewed your personal insurance policy? Do you have the coverage you expect? Have you recently purchased something major? It may be time to think about your coverage and “get to know” your policy
This time of year is all about renewal — spring flowers, putting away the coats, and paying Uncle Sam. But there’s one other important item for your spring to-do list.
When’s the last time you checked out your homeowners or renters insurance policy?
Insurance is at the top of the list of things we take for granted — that’s the purpose of insurance, after all. We take out a policy, pay for it, and hope we never have to use it. And chances are good that the average person can’t list the coverage they pay for, or even what’s covered under that policy.
Know Your Policy
When you take out a homeowners insurance policy or get a renters policy, you’re being a responsible citizen. You’re protecting the investment you’ve made in your home, as well as your personal property. You might even be protecting yourself from liability if you’re ever sued.
But none of that will matter unless you know what you’ve paid for. Take a moment to review your policy and learn about the coverage you have.
Here are a few things to look for:
Read your declaration page: This is the one-stop-shop for understanding your policy and coverages. It will list you, your property address, and what the policy covers.
Coverage: This is a detailed list of what is covered. Examples are personal property, dwelling, personal liability.
Premiums: This is the amount you pay for the coverage you receive. You should see an itemized list of premiums near or adjacent to your list of coverages.
Credits: You might receive credits because you have excellent credit, or because you carry multiple policies (such as auto insurance) through this carrier.
Limits and exclusions: This is where it gets important. Read what’s excluded from your policy. For example, you might discover that if you’re self-employed, liability coverage might not apply to you under this particular policy. Also find out what the limits are for your policy — if your home is worth $500,000 but you only have coverage for $300,000, there might be a problem.
Read between the Lines
So you’ve gone over your declarations page. Great! Do you have the right coverage? For your personal property, read the coverage as well as the exclusions — and, perhaps, the fine print on the following pages — to find out if you have replacement cost-coverage, or actual cash value coverage. These are two very different things.
Replacement cost means that your insurer will pay to replace the item in question. For example, if your diamond ring was stolen, replacement cost would replace it down to the cut, carat and color. But actual cash value coverage would only pay what the ring would be worth today, factoring in depreciation and other factors.
Think of it this way: If you sold your computer today on eBay, what would you get for it?
That’s cash value.
If you went to buy a brand-new computer — which would obviously cost more — that’s replacement cost.
As you read through your coverage, if anything sounds incorrect or confusing, call your insurance company or broker immediately.
Final Checklist
Here are some factors to consider when evaluating your homeowners or renters insurance coverage:
- Have you made a large purchase recently that needs special coverage? (Jewelry, electronics, art, antiques)
- Does your policy cover the actual value of the contents of your residence?
- Do you have enough personal liability coverage to protect you if you’ve been sued?
- Do you own a dog — and does your insurance company know? Dog owners are wise to have liability coverage.
- Are you self-employed? Liability coverage for your homeowners or renters policy might not apply.
The most important thing to remember is this: If you’re taking the time to have renters or homeowners insurance, make sure it’s covering what matters most to you. It might be worth a small investment in a supplemental policy rider to protect that diamond ring, or protect you in the event of a liability lawsuit. Call your agent, get a quote, and get the coverage you need.