Insurance Series: Protecting Your Property
When thinking about insurance, protecting your property should be at the top of your list. In this installment of our Insurance Series we talk about just that: how to insure your investments through optimal property insurance. If you missed our prior articles, you can always go back and check out our tips on life and disability insurance and health insurance. As with any coverage, it is important to have adequate coverage to cover your potential property loss.
If you own your own home, you probably had to obtain homeowner’s insurance as part of the purchase. However, it is always a smart financial practice to regularly check for better rates and make sure you still have the coverage you need. If you are in the market for a new house, making sure your new property is adequately insured will be a requirement, so it’s never too soon to start thinking about it.
When comparing policies, most will come with the same basic losses that the policy will cover damage or loss to:
1. The structure of the home;
2. Limited personal belongings;
3. Automobiles parked at the home; and
4. Injuries that occur on the property.
You generally will also have the option to purchase add-ons to your insurance for potential disasters. And in some instances, may be required to have special insurance add-ons. For example, if you live in an area prone to regular disasters such as floods, hurricanes, earthquakes, or other natural disasters, you may want to spend the extra money for the extra insurance. Before finalizing any insurance policy purchase, you should make sure you understand what types of disasters are excluded from coverage and then add on anything you are likely to need.
Another consideration when picking a homeowner’s policy is how much coverage you want or need on the structure itself. Generally, insurance companies will offer three different types of coverage for structures:
1. Actual Cash Value Coverage. This type of coverage will cover the actual cash value of your home and personal belongings less depreciation. This is usually the lowest level of coverage.
2. Replacement Coverage. With replacement coverage, you will receive the amount it would cost to actually replace or rebuild the structure, as well as replace personal property. This is calculated without taking depreciation into account. However, the amount will be limited by the amount of coverage in your policy.
3. Guaranteed Replacement Cost. Guaranteed Replacement Cost coverage is generally the highest level of coverage. This coverage will cover the full replacement cost of the structure and personal property, even if the damages exceed the amount of the policy. Some insurance companies also offer Extended Replacement Cost policies, which allow payouts above the policy limit, but only up to a certain percentage.
As with any insurance, it is important to understand the value of your property, the likelihood of loss, and the amount of insurance you really need. Your insurance company or independent broker can help you to calculate your insurance needs.
Renters also should consider property insurance in the form of renter’s insurance. Some rentals require a certain amount of renter’s insurance before entering into a lease. Renter’s insurance is generally inexpensive, so it is a smart money move even if it is not required by your landlord. Renter’s insurance covers damage to the rental, as well as some limited personal property. Many policies also include injury coverage. If your landlord requires renters insurance, be sure to find out the amount of coverage required before purchasing your policy.
Valuable Personal Property Insurance
Even though homeowner’s and renter’s insurance generally have some coverage for damage, theft, or other loss to personal property, this coverage is usually far less than needed to cover all a person’s personal property. If you have personal property such as jewelry, firearms, computer hardware, electronic systems, artwork, or other higher value items, you should consider additional coverage for those items. Valuable Personal Property Insurance is designed to cover specific items. When you purchase the policy you will be required to provide proof of ownership of the items as well as their value. You should be prepared to provide photos, receipts, and appraisal reports to your insurance company with the policy. Failure to provide this information could end up limiting your ability to collect on the policy in the event of a loss.
If you own a vehicle, you likely already have car insurance. While not all states require auto insurance, they all require financial responsibility to operate vehicles on public roadways. Therefore, it is in your best financial interest to have automobile insurance. Most standard policies cover property damage, theft, or loss to the vehicle, liability coverage for accidents caused by the driver, and medical expenses for bodily injury. However, the coverage limits will differ by policy, so you will want to make sure you have sufficient coverage.
When selecting auto insurance, it is also important to know whether you are covered in case of an uninsured motorist. Many accidents occur where the other driver cannot be identified or does not have their own insurance. You will want to know from your policyholder if you are responsible in such an accident, or if your policy will cover the damages.
Another add-on to consider with your vehicle insurance is Gap Coverage. Most vehicle insurance policies will only cover the cash value of your car at the time of the loss. If you owe more on your car than the cash value of the car due to depreciation, you could end up having to continue to pay on a car totaled in an accident. Gap Coverage will cover the full cost of the vehicle, including any amount still owed on the car. If you are financing your car and owe more than it’s worth, you should consider Gap Coverage.
If you have more vehicles to insure than just cars, most companies also offer insurance for other vehicles, including motorcycles, RV’s, boats, ATV’s, and other vehicles. These vehicles should absolutely be protected from damage or loss, just like your everyday car.
Bundling The Coverage You Need
The last property insurance consideration is to make sure you have the best coverage for the lowest cost. While shopping for insurance, ask about if there are discounts for bundling property insurance. Many companies will lower policy premiums if you have multiple types of property insurance with them. Since most people need more than one form of property insurance, the best financial decision is to try to bundle them together for a discount, rather than going through multiple companies.