Insurance Series: Are You Protected?
I hear this question a lot and want to clear up any confusion on the topic. Home is where the heart is and where many of your prized possessions are, so it’s really important to protect it! Whether you own your home, are considering purchasing, or currently renting, you need to insure your space.
Let’s answer a few more frequently asked questions on the topic:
What is homeowners insurance?
Homeowners insurance protects your house and personal belongings from many incidents, such as fire, storms, or even theft. Knock on wood that this never happens to you, but if your house is completely destroyed, your homeowners insurance would pay for either a new home or to rebuild your previous home. Another huge benefit of homeowners insurance is coverage for your living expenses if you have to leave your home due to damage or destruction. Last but not least, your homeowners insurance also provides liability insurance to cover medical and legal bills if someone is injured on your property.
There are always exclusions to every policy, such as damage caused by neglect. So, make sure to review your policy carefully and work with your insurance provider to add any additional coverage you may need based on your home’s location and structure. For example, if you live in an area prone to flooding, you’ll want to work with an agent to purchase additional flood insurance through the National Flood Insurance Program.
What is renters insurance?
You’re not really “adulting” if you don’t have renters insurance for your apartment. Renters insurance is comparable to homeowners insurance. A renters policy covers your personal belongings and your living expenses if you have to vacate your rental due to a covered incident, and it also provides you with liability coverage. Having renters insurance when you live in a multiuse building such as an apartment is crucial, because you’re not in control of what your neighbors, whom you happen to share walls with, may be doing in their apartment. Let’s say Jessica from the apartment upstairs forgets she was running a bubble bath, falls asleep, and floods her apartment and yours. If you have renters insurance, all the belongings listed in your policy will be covered and paid for by your insurance company. If you don’t have renters insurance, you’re going to be quite upset with Jessica and yourself when you have to pay out of pocket to replace your possessions. Can you imagine seeing her in the elevator? Yikes!
How much coverage do you need?
Replacement Costs
For homeowners insurance, you want to make sure you have enough coverage to completely replace your home if necessary. Keep in mind that the cost to replace your home will most likely be different from the original cost of your home. I recommend recalculating the cost to replace your home every two to three years. When calculating this cost, you need to consider current construction costs, any improvements or renovations you have made, new building codes in your area, and old or hard-to-replace features. It’s best to work with an experienced insurance agent to do this calculation.
Additional Living Expense (ALE) Coverage
If your place is damaged and your home is rendered uninhabitable, your renters and homeowners insurance can pay for your hotel, meals, and other living expenses (above what you'd normally pay).
The key here is that the additional living expenses focus on the additional cost.
For example, if a renter normally pays $1,000 a month for rent, and due to a fire in their building, they must find temporary lodging until the apartment is inhabitable again. The renter finds temporary housing of similar quality and location, but because it's furnished, it costs $1300 a month. Their additional living expense is $300.
Below are examples of things that an insurance company will consider paying for under the ALE coverage in a claim:
Laundry
Meals
Storage costs
Costs for increased mileage or transportation costs due to the new temporary location
Temporary lodging
Personal Property Costs
Both homeowners and renters need to ascertain whether they have enough personal property coverage to replace all of their belongings. Ask yourself, “How much money would I need to get back on my feet if I lost everything?” To ensure you have enough coverage, you will need to put some time and effort into making an inventory and taking photos of everything you own. This sounds daunting but is totally worth it! Investing a couple hours now may save you months and a ton of money replacing everything later. Again, it is a must to work with an experienced insurance agent on this and to get additional coverage if you have really expensive items you need covered, such as jewelry or equipment.
Liability Costs
Now that you have covered your home and your stuff, you need to determine how much liability insurance you’ll need if someone else is hurt in your home. A good example of this, that many fail to think about, would be if someone makes your dog feel threatened, and your dog responds by biting them. This could result in thousands of dollars in medical bills that you could be responsible for. You’ll be relieved to know that your homeowners or renters insurance will cover these bills. Just make sure to work with your insurance agent to ensure your dog is covered, as some breeds are not! This is just one example of why you need liability insurance. I could go on and on about people falling down stairs or slipping on an icy driveway, but I think you see the importance by now. This will come in handy if you’re facing any legal bills in addition to medical bills.
Housing is usually our biggest investment, so protecting it is very important for our well-being and our financial future. Don’t wait any longer, it’s time to review your current coverage and make sure you’re in good shape!
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