1. Not insuring your home
to its replacement cost:
It’s important to
understand the difference between the market value
and the replacement cost of a home.
The market value is how much the home can be bought
and sold for. This takes into account location, lot
size, view, etc. The replacement cost is how much
it would cost you to rebuild your home in the event
of
its total destruction. Rebuilding costs have increased
dramatically over the past few years. Many homeowners
in the recent Southern California fires have found
out that they didn’t have enough insurance
to rebuild their home. It’s better to overestimate
than underestimate the cost to rebuild.
2. Not checking to see if their Homeowners Insurance
has the Extended Replacement Cost endorsement:
The Extended Replacement
Cost endorsement provides an additional amount of
coverage over and above the
dwelling limit on your homeowners policy.
While you try to estimate the cost to rebuild correctly,
in certain catastrophic events, such as an earthquake
or brush fire, the cost to rebuild might be even
more
than originally estimated. Contractors become scarce
and so those that are available charge premium prices.
The Extended Replacement Cost endorsement will normally
increase the limit of dwelling coverage by 50% above
the amount on the policy. For example, if you determined
the replacement cost of your dwelling to be $300,000
and you had a 50% Extended Replacement Cost endorsement
on your homeowners policy, your insurer would pay
up to $450,000 to replace your home. Some people
try to “low-ball” the
replacement cost of their home by relying on the
Extended Replacement Cost endorsement. Many homeowners
in the
recent fires did this and discovered later that even
with the Extended Replacement Cost endorsement they
did not have enough insurance to rebuild their home.
3. Not understanding how Earthquake Insurance works:
In California earthquakes
are a fact of life. It’s
not if, it’s when. A standard homeowners policy
excludes coverage for earthquakes. You can buy earthquake
insurance as an endorsement to your homeowner’s
policy or as a standalone policy.
Earthquake insurance has
a different deductible than your homeowners insurance
and some policies limit what
is covered by the earthquake coverage. An earthquake
policy typically has a 10% or 15% deductible. This
means that for example, if your home was insured for
$300,000 and you had a 10% deductible, you would be
responsible for the first $30,000 of damage. If you
had a 15% deductible you would be responsible for the
first $45,000 of damage to the home.
Some earthquake policies, like California Earthquake
Authority (CEA), limit the coverage to just the dwelling,
with a small amount for contents (typically $5,000)
and an even smaller amount for additional living expenses
(typically $1,500). Contents and additional living
expenses are important coverages for most homeowners.
Call us for more details about earthquake insurance.
4.
Not knowing the update information on your home:
In order to get the most
competitive premium on an older home, insurers
need to know the following:
- Has your plumbing, heating, roof and electrical
system been updated in the past 20 years. Insurance
companies want to know that your home’s
systems have been taken care of and upgraded.
- A roof should not be older
than 20 years. Circuit breakers are a
must. Copper plumbing is desirable and central
forced air heat is also desirable.
- An older house (built over 25 years ago) should
be retrofitted. This means that the house has
been bolted to the foundation; the water
heater has been strapped.
- Is there a central alarm system in your home?
If so, get a copy of an invoice and you could
save 10% to 20% on the cost of your homeowners
insurance.
5. Not taking a high enough Deductible:
The more risk you are
willing to take, the less you will have to pay for
your homeowners
insurance.
We
recommend a $1,000 deductible to keep your
premium down. After all, most homeowners have
a claim on an average of once every 12 years. Why
not take
the guaranteed savings of a higher deductible
instead
of giving that money to the insurance company
each year?
6. Not buying enough Liability Insurance:
Most people don’t
think about liability insurance until something bad
happens. Liability insurance
protects you, your future earnings and your family
wherever
you go. If someone sues you for bodily injury
or property damage, the liability part of your
homeowners insurance
helps to pay for an attorney to defend you and
pay any judgment rendered against you. If you have
a dog
that bites someone, you could be liable for thousands
of dollars in damages. Buy a minimum of $500,000
of liability insurance and consider a personal
umbrella
policy, which protects you above and beyond the
liability limits of your auto and homeowners insurance
policies.
7. Not knowing what the limits
on jewelry, watches, furs, money, collectibles and
other valuable items are in your policy:
Many homeowners policies
limit coverage for theft of jewelry to $1,000 or
less. For a few dollars more, you can increase this
limit to $5,000 or $10,000,
depending on the insurer. If your stone falls out of your diamond ring, it
isn’t
covered unless you have purchased an endorsement protecting your jewelry.
Ask a Tegner-Miller agent how to provide coverage for your valuable items
and collections.
8. Not using an Independent Agent like Tegner-Miller
to purchase your insurance:
Tegner-Miller Insurance
Brokers is an Independent Insurance Agent representing
many different
insurance companies. We can help you find the
insurance company
that best fits your needs. Our agents use the latest computer technology
to find
the best price and coverage for your type of home. Our agents are always
available to answer your questions and give
you advice. Give us a try.
