Homeowners Insurance: Are You Covered Enough? Are You Paying Too Much?

You may be paying too much for protection that’s not enough

Americans buy homeowners insurance to protect themselves against major damages from weather, but the reality is, the very worst rarely even happens. Tornadoes, major thunderstorms and hail storms, flooding, and house fires don’t occur very often in most areas. Even when there is an event that happens, it tends to be minor and repairs are simple. As a result, people don’t spend much time thinking about the quality of their coverage and what is included or not, that is, until trouble happens.

 

Here are the top 9 insurance coverage items to watch out for, and be sure to talk to your insurance agent about your coverage before it’s too late.

 

1. The Things You Love Most May Not Be Covered

Do you have expensive art or sculptures? Got a wedding and engagement ring set from Tiffanys? Designer clothing, fine jewelry and art will likely exceed the limits of a typical homeowners insurance policy, which covers items like these only up to the policy limit for theft, generally in the range of $1,500-$3000. Ditto goes to high end technology like iPhones, iPads, Macs, computers, deluxe digital cameras, and others. For jewelry, furs, and fine art, you need extra protection called a “floater,” a separate policy with a zero deductible that covers accidental loss. For other valuables, such as high-end sports and tech equipment, you’ll need an endorsement, a policy add-on that raises coverage limits for certain categories of items. Talk with your agent to determine the best coverage for you.

 

2. The Larger Your Claim, the More You’ll Need to Prime for a Fight

Although nearly 80 percent of claimants in our survey reported no hassles with their insurer, for small to midsize claims, homeowners with larger losses were more likely to run into difficulties. Patience, persistence, and legwork are important. Start by documenting your claim with photos and written estimates and even receipts if you still have them, and ask your contractor for help in understanding the costs of construction for any home improvements and remodeling, and in dealing with the needs of insurance adjusters. In the event that something happens, don’t automatically accept the adjuster’s interpretation of the contract. If he or she says your policy doesn’t cover certain damage, ask to see the specific contract language. Disagree over the damage amount? Bring your contractor and the insurance company adjuster together to go over the estimate line by line. Still can’t see eye to eye? Ask another independent contractor for a second opinion.

 

3. Don’t Worry Too Much About Filing a Small Claim

Some people don’t make claims when they have a small loss for fear it will jack up their premiums and cost them more over time. Some home insurers might increase rates by tacking on a surcharge if the loss is above a certain amount, but the thresholds and surcharges vary by company, type of loss, and number of claims filed in a given period. State regulations figure in, too. Ask your agent how much your premium would go up, and for how many years, before filing a claim larger than your deductible. If the claim payout is higher than the annual surcharge times the number of years it would be in effect, then it might make financial sense to file the claim.

 

4. Your Credit History Will Affect Your Rates

Since the 1990s, insurers in 47 states (except California, Maryland, and Massachusetts, where the practice isn’t allowed) have used what’s called a credit-based insurance score to determine homeowners insurance premiums. They tend to keep this practice a secret. But according to insurance-industry representatives, credit scoring is supposed to be good for homeowners.

You can improve your insurance score by checking your credit report and fixing any errors. And every 12 months, ask your insurer to recalculate your score so you can benefit from improvements. And pay your debts on time.

 

5. Animal Related Damage May Not Be Covered

Generally speaking, the bigger and more unexpected the beast, the more likely the damage will be covered. So yes you are likely covered for a bear that tears up your house, but not very likely covered for squirrels, bats, rats, mice, birds and raccoons, depending on the company and coverage. Small pests are usually specifically excluded as vermin. Your own pets are also generally excluded if, for example, the new cat marks his spot on your living room carpet or the new puppy chews up the living room furniture. But if your pet bites someone else or does damage to another person’s home, that is typically covered under the personal liability protection part of your policy (though some breeds could be excluded).

 

6. You Should Consider Flood Insurance Even If You Don’t Live Near Water

Water is a source of never-ending homeowner grief; many homeowners are wrecked by burst washing-machine hoses and overflowing toilets, tubs, and sinks, and other issues. Heavy rain and hurricanes can cause flooding in low-lying areas and overwhelm storm sewers clogged with debris, and send the runoff toward your home. In most states, you need a separate policy to get flood protection. Talk with your agent. He or she can usually sell you flood coverage, but it might be pricey. You should also consider a sewer backup add-on, which protects you from damage when liquids run the wrong way through sewer lines. Backups can be a problem in cities with older sewer systems, where your raw sewage line is connected to the same municipal system that handles storm runoff. Inspect your home for signs of leaks, including stained ceilings, musty odors, and dampness around pipes and behind appliances that use water. In addition, regularly inspect water hoses and tubing on refrigerators that have icemakers, washing machines, and dishwashers, and replace old rubber with sturdier steel-braided hoses. Make sure to turn off your washing machine’s water supply when it’s not in use and especially when you go on vacation. Replace older screw-type valves on toilet water supply lines with ball valves, which are easier to turn off to stop an overflow. Periodically inspect your attic, roof, and upper-floor walls for weather-related water incursions.

 

7. Beware the Hail Loophole

Hail was the biggest single peril faced by many people, saying it was the reason for their homeowners insurance claim. Smaller hail can shatter windows and dent aluminum siding, but golf-ball-sized stones pelting your property at 80 mph can shred trees and punch holes in your house, roof and vehicles. Many typical homeowners insurance policies do cover hail. But cosmetic damage, such as dented but not structurally torn aluminum siding or awnings, may not be included. Even if your roof needs to be replaced, your payout might be severely limited after deductibles and the age of the roof are factored in. Avoid insurers that require special percentage deductibles for hail damage, which can mean you’re responsible for a portion of the loss up to 2 percent of the insured value of your home.

 

8. You May Not Be Covered Enough

Some homeowners do not realize that a standard policy does not cover everything. For example, 56 percent incorrectly assume that flood insurance is covered by a standard policy, according to Princeton Survey Research Associates International. And about 60 percent of all U.S. homes are underinsured by an average of 20 percent, according to CoreLogic, a company based in Irvine, Calif., that provides data to most major home insurers. Many factors can lead to being underinsured, including additions or remodeling their homes since the policy was purchased, rising labor and construction costs, and errors in the original policy’s property description. That being said, work with your agent to purchase earthquake, tornado, storm, flood and hail protection, if you live in those high risk areas.

 

9. You May Be Paying Too Much

For many homeowners, it seems easier to just stick with the company they are familiar with, because they have been insured by the same company for so many years. But in recent studies, many homeowners have discovered that by taking the time to shop around, they can often save hundreds if not more than $1,000 per year in premiums. It is most recommended that homeowners work with an independent agent who can compare premiums with several companies. Make it a priority to shop for the best-value combination of great service and low price.