You probably took out your first homeowner’s policy when you bought your first home and have not looked at it since. This can be costly. While I know it is as exciting as going to the dentist or sorting your sock drawer, it is important to look at your policy and talk to your agent to assure your policy meets your current situation. The other option is to find out the hard way: when you have a loss and find out that you did not have the coverage that you thought you did.
Myth vs. Reality
Most people think that their homeowner’s policy provides absolute or “strict” liability for injury that occurs on your premises. This is not entirely accurate. Most insurance policies provide a limited amount of of medical insurance coverage or “med pay” coverage for anyone who is injured on the insured premises. Thus, if your drunk neighbor stumbles and falls down the steps in your home and breaks his ankle, your policy will provide limited medical expense coverage. However, in order to recover more, an injured person has to prove that you were at fault in some way causing the injury.
This “med pay” coverage does NOT cover injuries to your own family members that live with you nor is there any type of liability coverage available for resident family members that are injured on your premises due to the negligence of another insured on that policy.
Homeowner’s coverage basically provides two types of insurance. The first is for damage or loss of the insured’s home or dwelling as well as related personal property. The second type of coverae is the liability coverage that protects you from claims against you or any family member residing with you. We recommend a minimum insurance of $300,000 and you may well consider purchasing an “umbrella” policy that provides one million dollars or more in coverage.
Important Limitations & Restrictions
Most people assume that their homeowner’s policy covers their ATVs, snowmobiles, boats , jewelry and firearms. This is generally true. However, most policies have very significant restrictions on all of these that can cause unpleasant surprises. For example, many insurance policies have restrictions on snowmobiles and ATVs that only cover injuries caused by their use while on the insured’s premises. Thus, there would be no coverage for injuries caused by your child’s operation of the snowmobile on public or someone else’s land. With respect to boats, the coverage usually only applies to smaller boats with limited house power. Thus, if you have bought a new 17-foot speed boat with a 150 horsepower engine, that would typically not be covered at all by your policy. You generally have to buy a special endorsement or rider to cover your ATVs, snowmobiles or boats.
Also, most policies have significant dollar limitations for jewelry and firearms. Again, you have to check your policy or call your agent and realistically appraise the value of these items. Typically, when a person buys their first house, they do not have more expensive boats, ATVs and so on. However, as a person gets older, makes more money and quires more personal property, their insurance policy often does not keep up with their acquisitions.
The same is true with the insurance coverage on your home’s value. Many people remodel and expand their existing home rather than purchasing a new home. You should periodically review these additions, upgrades and so on with your agent to make sure that you have enough insurance to cover them in the event of a significant loss.
Inventory Your Belongings
Another good idea is to video an inventory of your home’s contents. It does not take long to go through your home and shoot footage of your belongings. It is important to store this footage somewhere safe off the premises in case your home is destroyed so your evidence of your contents is not destroyed along with the home. It is easy to forget all of the items that you have purchased and acquired. This would be particularly true of collectibles and electronics that can easily add up to several thousand dollars butr you and your family might be hard pressed to remember them all.
We had an experience where some laptops, CD’s and DVD’s were stolen from our home. I am sure we forgot a few of them in our inventory. We also learned that “replacement costs” coverage means that the insurance company will give a you a depreciated amount and then send you a check to cover the replacement costs only after you have in fact paid the money to replace those items. The insurance company was also willing to purchase some of the stolen items for us.
In summary, it is important to review your policy and talk to your agent or someone else knowledgeable in this area to make sure you have the coverages that you need. The only other way to find out is generally the hard way.