© 2008-
SavingsNut.com™ – The Best Site On The Internet For Money Saving Tips & Frugal Living Ideas
“A Detailed Guide of Money Saving Advice & Budgeting Know-
“The best resource on the Internet to teach both young and old how to reduce everyday household expenses. Simply the best.” TSN
Also Visit
Thanks for Visiting
HOMEOWNERS INSURANCE -
Deciding On Coverage & Deductible Amounts (continued)
2. Generally, your personal property will automatically be insured for limits of about 75% of your home’s value, as part of your premium.
a. In most every case (especially since certain “valuables” have separate and lower limits, as noted above) 75% of your home’s coverage will be more than enough to cover your personal property. For instance, if your home is insured for $200,000 your personal property will probably be insured for about $150,000. But check with your insurance company. It is wise to take pictures or videos of every room in your home and it’s furnishings, as well as other personal belongings, in case of fire or other catastrophe. Keep these pictures in a safe place outside the home (i.e., a safe deposit box or at a friend’s or relative’s home in a different neighborhood) so they can be used to demonstrate what was lost if a claim needs to be filed.
b. Consider getting the “Replacement Cost Coverage” for your personal property, particularly if you have owned much of your personal property for several years. Otherwise, you will only receive a depreciated amount for your losses, which could be considerably less than replacement cost for those items.
c. If you have certain types of personal property (jewelry, collectibles, etc.) with restricted coverage limits, consider adding special coverage for these items, particularly if the loss of these items would be large. If you have added coverage for this type of property, and you have since disposed of the property, make sure you notify your insurance company and drop coverage for the items you no longer own.
3. The amount of personal liability coverage to carry is a personal decision, but many people base their decision on their relative level of financial net worth.
a. The higher your net worth, the more you have to lose, which often requires a higher level of personal liability insurance. Some people recommend buying liability protection up to the level of your net worth (although this may require an “Umbrella” policy discussed below or may, in some cases, not be feasible or desirable).
b. Buying higher coverage amounts has another benefit in addition to protecting you from large claims. If you have a high level of liability coverage, the insurance company has more to lose if you are found liable for a large claim. Therefore, if you have a high coverage amount they are more likely to defend you in any legal action at their cost, in order to protect their interests. If you have a low coverage amount, they may quickly decide to settle the claim, leaving you totally on your own with respect to any claims over and above the insurance company’s settlement. Also, if you are considering buying an “Umbrella” liability policy to provide even more liability protection, you will probably need to buy at least $300,000 of liability coverage in your homeowner’s policy.
c. Umbrella liability policies are generally available if you want more liability protection than can be purchased in your homeowner’s policy. They provide personal liability coverage over and above both your homeowner’s coverage and your automobile liability coverage. Coverage amounts are often available in varying increments up to a total of $2 million or more. The decision to buy an Umbrella policy is not as much dependent on whether you feel you may cause someone harm (who knows the future), but what assets you have to protect.
4. While the amount of certain types of coverage, such as liability and various endorsement coverages, can be changed in order to reduce annual insurance premiums, the premiums saved may not be worth the additional risks taken. The exposure could be large. Remember, insurance should be used to shield you from large, unaffordable losses, that would be financially debilitating or devastating. However, often premiums can be reduced considerably by increasing deductible amounts.
a. While higher deductibles do increase exposure to loss, the additional exposure is generally manageable, and the annual savings of lower premiums may be worth the additional risk. Many people also feel that higher deductibles are just fine, since they do not plan on reporting small losses in any case, because they feel the insurance company may raise their rates if these claims are reported. If you feel this way, a higher deductible may be even more attractive.
b. Keep in mind, the same deductible (except for special catastrophic events) is generally applied to losses on your dwelling, personal property and loss of use, and deductibles are available in varying amounts, from very low amounts to thousands of dollars. Ask your insurance company what the premiums are for different deductible levels, and make your decision on what is right for you.
5. Deductibles for catastrophic events such as hurricanes, earthquakes, etc. are often set by the insurance company at much higher levels than for “ordinary” losses. Make sure you understand just what these deductibles are, and if they can be raised or lowered, and what impact that has on premiums.
6. The cost of Identity fraud Protection is usually not large. If you are concerned about your exposure in this area, ask your insurance company about the particulars.
Next Page
