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Buying Insurance
Even when you take steps to prepare for the possibility of a disaster, you still could experience unavoidable property damage. That’s why renters’ and homeowners’ insurance is so important—yet many people affected by a disaster are underinsured or not insured at all. Answers to questions you may have about homeowners’ and renters’ insurance follow.
What should I look for in a homeowners’ policy?
A few suggestions for what to look for in a homeowners’ policy are outlined below:
Buy, at a minimum, full replacement or replacement cost coverage. This means the insurance company will pay to replace your house up to the limits specified in the policy. In some states, full replacement cost insurance is not available. Check
with an insurance broker or agent to determine the maximum available coverage.
Investigate buying a guaranteed replacement cost policy. When available, these policies can pay to rebuild your house, including improvements, at today’s prices (but usually limited to 15 percent more than the amount of the policy coverage).
Have your home periodically appraised to be sure the policy reflects its current replacement costs, and update the policy to include any home improvements.
Buy a policy that covers the replacement cost of your possessions. Standard coverage only pays for the actual cash value (replacement cost discounted for age or use). Typical policies cover personal property at 50 percent of dwelling coverage, so you may need to purchase more coverage.
Make sure you understand what the policy will and will not cover, and what the deductible is (the amount you pay before the policy pays).
Check state or federally operated insurance pools if you find it difficult to obtain private coverage because of a recent disaster. Premiums often run higher than market rates, but this is better than no coverage.
Talk with your insurance agent about other considerations related to your insurance. For example, ask if the company will cancel your coverage if you are ever late with a payment or if you file several claims in a short period of time. Find out if making a claim could jeopardize a new buyer’s ability to obtain insurance on the house if you decide to sell it. Also, ask the agent if the insurance company keeps records of your conversations about these issues, and if that could negatively affect the insurability of your home.
After a disaster, almost all insurance companies place a 30-day moratorium on new coverage. Consider delaying the closing of a house purchase if that happens.
What should I know about renters’ insurance?
Renters’ insurance pays for damaged, destroyed, or stolen personal property. This insurance is not very expensive, but it is important to have because your landlord’s insurance will not cover damage to or loss of your possessions. It also provides liability coverage for you, and it generally covers damage to the interior surfaces of units you rent.
Comparison shop for the best coverage at the best price. Start with the company that insures your car, because discounts may be available if you carry more than one policy with the same company. Make sure you understand the deductible and what
the policy does and does not cover. For example, will the policy pay for living expenses if you have to temporarily move somewhere else?
Do I need other insurance coverage?
Depending on where you live and your individual circumstances, you may want to consider the following types of insurance:
Earthquake insurance
Premiums and deductibles for earthquake coverage are high, but it may be better than no coverage at all. Generally, coverage for your possessions is available as well as for the home itself.
Flood insurance
If you are unable to buy additional flood protection insurance from your insurance company, call the National Flood Insurance Program at 1-800-427-4661 for an agent who writes flood insurance in your area. In addition, www.floodsmart.gov is a Web site that provides information on how to obtain a flood insurance policy. Also, if you buy a home in an area that has a special flood hazard area in any given year (also known as a 100-year floodplain), the lender may require you to purchase flood insurance as a condition of receiving a mortgage.
Riders
Ask your insurance agent if you need a policy or a rider to cover computer equipment, home office property, jewelry, artwork, or other expensive items. If you have equipment that you regularly use at home for work, normally it is not covered by your homeowners’ policy.
Umbrella liability insurance
Liability insurance protects you against financial loss if someone is injured on your property and sues you. Homeowners’ policies provide limited personal liability coverage. If you think you need more coverage, increase the coverage in your existing policy and consider purchasing an umbrella or excess liability policy.
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