Make sure your coverage is up to whatever Mother Nature throws your way
I live in Ohio and don’t normally think of it as a “severe-weather” zone. Sure, we get some tough winters. But putting up with a foot or two (or three) of snow seems nothing like dealing with, say, the hurricanes that rip through the Southeast each summer and fall.
But virtually every part of the country has to deal with some form of severe weather. These are weather events that can cause wide-ranging property loss. From an insurance company’s (and customer’s) point of view, that means not only the headline grabbing hurricanes and tornadoes, but tropical storms, typhoons, super storms, severe wind, flooding, wildfires, earthquakes, and hail.
Here are a few questions to ask your agent or insurance company to make sure your homeowners policy is ready for anything.
1. Do I need flood insurance?
No matter where you got your homeowners policy, it probably doesn’t cover damage caused by flooding from hurricanes, tropical storms, river overflow, or other weather events. For that coverage, turn to the National Flood Insurance program. It’s a federally-backed program that provides affordable flood insurance to people in flood-prone areas. Its website even has a useful tool to help you understand your home’s flood-damage risk.
2. Do I need extra coverage for basement flooding?
Whether or not you have a flood insurance policy, find out if your policy covers damage to your basement—and items in it—due to sewer backup, sump pump breakdown, water seepage, or burst pipes. Be sure to carefully consider the amount of coverage you need based on whether your basement is unfinished and used for storage (you’ll want to be sure you have enough coverage for whatever you store there), or a finished living space (you’ll need to account for the cost to repair and replace water damaged furniture, flooring, molding, drywall, etc.)
3. Do I need earthquake insurance?
Many homeowners insurance policies either won’t provide coverage for earthquake damage, or will require you to buy extra coverage—called an “endorsement.” If your insurer doesn’t offer earthquake coverage at all, separate policies are available and (obviously) recommended in areas where quakes are common.
4. Is my home covered for its true replacement value?
This question can be restated as: If my home were destroyed, would I get enough money to rebuild it? If your home is insured for its market value—the dollar amount you see on Zillow, for instance—the answer might be “no.” The market value reflects what others might pay for your house were it for sale.
The cost to actually rebuild your house is a totally different thing, reflecting things like materials and labor, and may be much higher than the market value. This is called the replacement value. Make sure you understand and are comfortable with your policy’s coverage limit.
Also, think about your personal belongings—furniture, electronics, appliances, etc.—and make sure your coverage reflects the cost to replace them. Again, if your home were destroyed, you’d want to go out and buy new items with the money you get from your insurance claim. Make sure it’s enough.
Tip: You may need to get a policy endorsement to fully cover expensive jewelry and other personal valuables.
5. Are my roof and siding covered?
Some homeowners policies provide reduced coverage levels when a roof or siding reaches a certain age. They may, for instance, not cover roof damage at all, or perhaps pay to repair damage based on a depreciated value (insurance companies call this “actual cash value”). Your company may also offer an option to buy an endorsement to get full coverage for an older roof.
6. Would my policy cover living expenses?
If you’re forced out of your home while it’s repaired or rebuilt, you’ll obviously need a place to stay. If you have a relative who can spare the space you need, great. But chances are, you’ll want to rent an apartment or house. Some policies provide only partial living expense coverage (covering a limited amount of time, for example), or none at all. Realize it could take weeks or months before you’re back in your home, and make sure you have a level of coverage you’re comfortable with.
The way I see it, property insurance does two things. It makes you financially “whole” again if something bad happens. And, it helps you sleep at night—even if nothing happens.
Understanding what your homeowners policy covers—making sure it’s adequate for both your risk (wherever you live) and your investment—will help ensure it does both.