It’s not just about fire insurance. How well do you know and understand your homeowner’s insurance policy? I hear all too often about insurance “tragedies” – instances when a homeowner thought that they were covered, when they were not. I’m sharing some of those examples here, hoping that it may trigger a call to your insurance broker and a correction to your policy, if needed. Also, be sure to seek appropriate legal advice from an attorney, as I’m not an insurance broker and I’m not qualified to give legal advice.
1. Have you placed your home in a trust? If so, make sure that your insurance policy matches your title and shows the trust as insured.
2. Do you understand flood insurance? If you don’t have it, you won’t be covered by water that comes into your home from outside. While most of us assess the risk of flooding based on proximity to rivers, creeks, lakes or steep slopes, nature may have other ideas. In 2004, I sold my home and moved into a temporary rental. It was a house on a flat lot, at the top of a hill. When I secured my renter’s insurance, I did not choose flood insurance. A week later, a torrential downpour flooded my entire home. The rain was simply falling harder and faster than it could flow down the patio drains. The house had a slab foundation, and it was surreal to watch the water rise above the lip of the glass sliding doors and flow into the house, flooding the entire home within a few minutes. That was a hard lesson learned, especially for the landlord who also did not have flood insurance. With storms getting stronger, this may be something to consider.
3. Speaking of landlords, if you own rental property, does your insurance policy reflect that the property is a rental? If not, you might not be covered.
4. Did you know that your insurance company probably doesn’t like a vacant house, either? If you move out of your house (perhaps for putting it on the market to sell?) be sure to notify your insurance company.
5. If you own a condo or townhome, do you understand the HOA master policy and what it does and does not cover for you? This is especially important with a townhome, which usually has very little coverage at the HOA level. Typically, only the exterior of the structure is covered. When that is the case, it means that unless you have your own policy that covers the interior (think flooring, cabinets, appliances, countertops, doors, lighting, etc.) you may be left paying out of pocket to rebuild your interior, if needed. Another consideration with an HOA and attached structures is Earthquake insurance. If the HOA does not have earthquake coverage, how will repairs be made or structures be rebuilt, in the event of a disaster?
6. It’s your job to document your property and valuables. When you set up your homeowner’s
insurance or renter’s coverage, you probably discussed coverage limits with your insurance broker and picked amounts that were logical. Whether you have a big policy or a small one, did you know that you have to provide proof of the existence and value of your property, in order to be fully reimbursed? One of the best ways to do this is with pictures and video, safely stored digitally. You might also be required to provide receipts, and some items such as art and collectibles might not be covered under your average policy. While this may seem obvious to some of you, a less obvious example is home renovations. Be sure to document home improvement projects, new appliances and fixtures and anything else that changes, especially if you’ve done work yourself or paid cash for labor or materials.
7. Some policies offer “Guaranteed Replacement Cost,” but this is not standard. It’s a good idea to review your coverage and make sure that you are insured for enough to rebuild, if needed. If you haven’t checked on construction costs recently, you may be surprised by how much it will take to rebuild.
8. Speaking of construction, it’s not uncommon in our area to build a new home, ADU or addition, without financing, or by using a line of credit from a different property. If you are financing, your lender will insist on proof of insurance. If you are paying cash, don’t forget to set up insurance on your construction project, before you start building.
Finally, in our current world with known challenges relating to obtaining and maintaining homeowner’s insurance, be sure to do your homework. I’m hearing all too often that someone thinks that their home is uninsurable, or that the California Fair Plan is their only option. Sometimes that’s true. However, consulting a good insurance broker should be your first step in making a decision. Insurance availability has been changing on a daily basis. Not all carriers are doing the same thing. I’ve dealt with well known insurers in California who have said that they are not writing new policies, yet they’ve neglected to mention that they do have a limited number of policies available each month, so you can get in line for the policies that will be available next month. Some homeowners are finding good options with insurance companies that have not historically done much business in California. These companies are more willing to take on the risk, as they will not be overly impacted by a large disaster.
