Renewing insurance policies and reading declaration pages is everyone’s idea of a great night after your kids go to sleep, right?
Or is that just me?
The good news is that you really only need to do this once annually, and reviewing your policy might lead to premium savings, thus the time spent could be considered an investment. Silver linings, if you will.
In any case, to make this process a little less painful, here are five items to review on your policy to ensure it is providing you with ample coverage and make sure you aren’t paying more than you need to. (please note – all the items below are listed on the declaration page, so be sure to ask for this from your agent if you don’t already have it handy).
- Are you adequately covered for structural losses/damages? Does your dwelling coverage amount match what it would cost to rebuild your home? If your policy is more than 5 years old, this number might be lower than it should be as construction costs continue to increase. Same goes for “other structures.” Have you recently invested in a pergola, screen enclosure, fence, or other backyard improvements that you want covered by your policy – or are you comfortable covering the replacement costs on your own? Same goes for personal property – take a look at your policy and make sure your stuff is covered.
- Are you adequately covered for medical losses/damages? The good news here is this coverage is relatively inexpensive when compared to the dwelling coverage listed above (at least for us Florida residents). However – it is vital to be properly covered as accidents happen, especially if you entertain often. There is no “perfect” amount of coverage, but it is wise to have a minimum of $300k of personal liability and $10k of medical payments
- Are your deductibles too low? As crazy as it may seem, most homeowners have deductibles that are TOO LOW on their policies. For example, if you’re a/c breaks and the replacement cost is $1,500 with a $1k deductible, is it really worth your time, attention, and hassle to file a claim for $500 with your insurer (not to mention having a claim against you)? Most likely not. If you have an adequate emergency fund and there is meaningful premium savings, consider increasing your deductible. Personally, I have a $2k deductible on my policy. The one exception – Hurricane deductibles (if you know, you know). Keep an eye on the percent deductible. 2% might seem low, but that number is based on the dwelling coverage and gets steep fast.
- ASK FOR DISCOUNTS! I can’t say this loud enough. Did you get a new Roof? Make sure to inform your insurer. Did you get a new security system? Inform your insurer. Do you live in a gated community? Inform your insurer. There are numerous discounts based on the age of your home and other factors that are not automatically accounted for in your policy. Make the call!
- Always remember the reason you have the coverage: Insurance is one of the things you pay for that you never want to use. Who wants to get in a car accident or have a tornado blow away their home. At the end of the day, insurance is a transfer of risk, and you want to make sure the counterparty (aka insurance company) is reputable enough to carry the burden of the risk you are putting on their shoulders. In short – picking the lowest cost provider that has a name you are not familiar with might not be a prudent choice.
Want to review your homeowners policy? Schedule a meeting with us!
This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.
Frankly Finances is a registered investment advisor with the state of Florida and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure for additional information regarding the qualifications and business practices of Frankly Finances.