Are You Properly Insuring Your Home?

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Is your home covered in the event of a mudslide, earthquake, or hurricane storm surge? Unless you understand homeowners insurance coverage, and keep your coverage up to date, you could lose your home to the unexpected wrath of Mother Nature.

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Is your home covered in the event of a mudslide? Mostly likely not. How about an earthquake, or hurricane storm surge? Unlikely. Unless you understand homeowners insurance coverage, and keep your coverage up to date, you could lose your home to the unexpected wrath of Mother Nature.

Take the time now to find out exactly what coverage you have, and how you could improve on it.

1. Know What You're Looking for:

There are four basic forms of homeowners insurance policies. Review your house insurance yearly to make sure you are covered for any conceivable incidents in your area. Even if the possibility seems unlikely. Make sure you are not overpaying for the value of your home, but also not underinsured either.

  • HO-2 The Broad Form: This covers fire and lightning, smoke, vandalism, theft, windstorms and hail, damage from the weight of snow, ice, sleet, surges or short circuits in electricity or problems stemming from the malfunction of plumbing, heating, air conditioning systems or domestic appliances, explosions, riots and civil commotions, damage by vehicles or aircraft, glass breakage, and volcanic eruptions.
  • HO-3 The Special Form: This is the most widely-sold homeowners policy. It provides all of the above plus more extensive personal property coverage. The exceptions are: floods, earthquakes, war, nuclear accidents, and similar catastrophes.
  • HO-5 The Comprehensive Form: Except for floods, earthquakes, and war, this policy covers everything but it is not available through all companies. If you have special circumstances, you can purchase riders to a Special Form to expand its coverage.
  • HO-8 Older Homes Policy: This covers much older homes that would be prohibitively expensive to replace. It covers the Actual Cash or Market Value of the home at the time of damage, not the full amount of money you spent restoring it.

2. Calculate Your Gamble:

How much money do you need to set aside to cover a loss? It depends on the size of your deductible (the amount of money you need to pay before your insurance kicks in). Deductibles can be as low as zero or well over $1,000. As a general rule, the higher the deductible, the lower your insurance premium. And a fair warning: too many little claims on a low or no-deductible insurance policy can flag it for cancellation.

3. Take Good Care of Your Worldly Possessions:

The contents of your house are insured as part of your homeowners insurance. Depending on your policy, they are insured for 50-75 percent of the value of your structure. In other words, if your house and its attached structures are worth $100,000, your contents are insured for $50,000 to $75,000. Is that enough?

The value of your worldly possessions is calculated in two ways: actual cash value or replacement cost. An actual cash value means the value of your computer, TV, couch or silverware at the time of your loss. If you have a three-year old refrigerator that cost $800 new, its actual cash value at the time of loss may be only $300, which is what you will get. Replacement cost, on the other hand, means you receive the amount of money it takes to replace that same refrigerator today.

4. Inventory Your Worldly Possessions:

This can't be stressed enough: if you need to file a claim for loss or damage, how will you prove what you owned? Take the time to photograph and record the value of your possessions. This takes time but you only need to do it once and the trouble it can save you in the future is incalculable. Fill your still or video camera with film or get extra memory cards for the digital variety and take a picture of all your possessions. Then make a list of them, detailing their costs at purchase and gathering any receipts you have. Take all of this information and store it somewhere not in your house such as a bank safety deposit box.

5. Have a computer?

Make sure your computer is covered under your policy—as well as “how is it covered?” If you use your computer in a home office, as a business machine, it may not be covered under your regular homeowners insurance. You may require an additional rider to cover this.

6. Fill in the Gaps—Earthquake and Flood Insurance:

Earthquake coverage, on average, is inexpensive. Yet, earthquakes do happen in unexpected places. Plattsburgh New York was hit with a 6.2 several years ago causing thousands of dollars worth of damage to surrounding homes. Yet, the insurance rider could have cost as little as $50 a year. This insurance is simply a requested rider to your homeowners insurance.

Think you don't need flood insurance? Think again. Mudslides from too much rain are covered under Flood Insurance—not regular homeowners insurance. Storm surges are considered flood insurance. In fact, one in three flood insurance claims happens in a "low risk" area.

Congress established the National Flood Insurance Program (NFIP) in 1968, administered by the Federal Emergency Management Agency. In 1983, Congress widened the scope of this, allowing corporate insurance companies to offer this coverage under the Federal Insurance Program.

Contact your insurance agency to see if you can get a policy through your current company or you can call the NFIP yourself at 888/CALL FLOOD for information. Online, check out the FEMA website at

Kitty Werner is the author of The Savvy Woman's Guide to Owning a Home, How to Care For, Improve and Maintain Your Home published by RSBPress, ISBN 0-9710356-0-1, $14.95.

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Kitty Werner
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