So I’m quickly learning with my blog that there are several areas in my life I have neglected financially. This blog is as good for me as it may be for you! As I conducted my research for this article, I found out that I am way under insured if something happens to my home!
When was the last time you looked at your homeowner’s insurance policy? I’ll be honest with you, it was 8 years ago for me. 8 years ago, my home was worth about $100K less than it is now and I haven’t increased my coverage. Hopefully you have looked at yours recently, but if not – let’s go over why it would be a good idea.
The Reason You Need Homeowner’s Insurance.
As you know, I try to cut corners everywhere I can when it comes to spending. One thing I do not skimp on is certain insurance coverage. For instance, I make sure I am fully funded with life insurance, vehicle insurance, homeowner’s insurance, and most recently I added identify theft protection (insurance) to our family budget (more on this in another article). These high ticket and liability items have the ability to crush us financially if we are not prepared for a disaster with proper coverage.
In general, I do not subscribe to extended warranties on things like vehicles, but the above stated policies I take seriously. So, what is the big deal with homeowner’s insurance? Let’s go over what exactly your homeowner’s insurance should cover.
What Type Of Coverage Do I Need?
Most plans are bundled together with several different types of coverage. Here we will go over the most basic and necessary items you need to ensure are covered.
1. Determine Your Dwelling (Home Replacement) Coverage Needs
More specifically, dwelling coverage is used to rebuild your home in the case of a fire, flood, earth quake, hurricane, lightning, tornado, or any other incident that destroys your home. If your home was wiped from the face of this earth, how much money would it take to rebuild exactly as it stood before the event? This is the amount of coverage you need to be insured for.
Often homeowners fail to account for home upgrades they have made over the years. Did you put on an addition to your home or remodel a kitchen? Factor in these costs to estimate the full replacement cost of your home. Can you imagine if you were only insured for $200K but it would take $300K to build your home? You would be on the hook for that extra $100K. For a couple of extra bucks a month, it is worth it to fully cover your home.
2. Determining Liability Coverage Needs
Liability coverage is used to protect you from being sued by people who become injured on your property. This can include anything from people getting bit by pets, slips and falls, broken bones, and anything else someone wants to sue you for. I personally know someone who’s dog escaped and bit someone, which led to lengthy court proceedings and civil fines to settle the incident.
Imagine the medical bills, lack of income, pain and suffering costs, and any other items that can quickly rack up. The majority of standard policies only have $100,000 in liability coverage. Increasing your liability coverage to a much more realistic number, like $500K, would be appropriate. Shop around for the best rates but make sure you don’t under insure yourself in this important category.
In addition to the above mentioned coverage – there are several dog breeds that insurance companies will not cover because they are deemed “aggressive.” Check with your insurance provider to find out if your dog is one of the excluded breeds. If so, be extra careful when your pet is around others – his bite may not be covered!
3. Determine How Much Personal Property Coverage You Need
This is probably the most difficult coverage area to estimate. Personal property coverage is very general. It covers everything in your house from bicycles, furniture, canned food in your pantry, clothes, jewelry, and pretty much every other item in your house that isn’t attached to the walls.
I recently went to a seminar where an insurance investigator gave us tips on making sure the insurance companies don’t deny your claims. It is painstaking at first, but it will save you from a ton of headaches you won’t want to deal with if hour house burns down or is burglarized.
He advised to walk through your house and take a picture of everything you own. Yes everything! Document everything and their estimated prices and keep it in a file or a binder for easy access. Keep another copy electronically stored on the cloud or other drive outside of your home to keep it safe in the event of a fire. Keep receipts and add them to this document. You would be surprised how much stuff you have accumulated over the years. Most of us underestimate the replacement value of all our items.
After you have photographed everything and documented it (hopefully with some receipts), contact your insurance provider and offer them a copy of the documents. This will add an extra layer of coverage for you if they ever come back and say you are fabricating and overestimating your losses.
In addition, some of the more expensive items may require additional coverage. For instance, we have an additional separate insurance policy for my wife’s wedding ring and band. Some of these extra coverage options are not expensive, so give them a look before you move on.
As stated earlier, I am not a fan of extended warranties or useless insurance, but there are several extremely necessary insurance policies you need in your life. Without homeowner’s insurance and the appropriate coverage, you are in danger of wiping out all of your savings and everything you have worked for in the blink of an eye. In the event of a house fire or overzealous civil litigation, you are not going to want to worry about having to pay for things out of pocket. This is what inexpensive insurance is for.
Make the time today or put it on your calendar to go over your homeowner’s insurance policy to see how much you are actually covered for. If you need to increase some of the amounts, shop around to find the best quotes. I hope you or I never need to make a single claim, but in the event of a tragedy – I don’t want your financial situation to be devastated!
Keep up the good work my friends, you can take control of your finances and start winning! I will be here with you through your journey, let me know if there is anything I can do for you! Please subscribe by email in the box below and don’t forget, you work too hard to be this broke!