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Homeowners Insurance: Up in Flames?

Homeowners Insurance: Up in Flames?

As every homeowner knows, “wildfire season” can happen at any time of year. As long as it’s dry enough and there is enough tinder around, sparks may fly.

There are many resources out there that explain how to protect your property from a wildfire, but they don’t always work. If you’re out of town or unaware of a fire nearby, you can get caught without proper protection.

One seemingly sure thing is to purchase homeowners or renters insurance for your property. Once you purchase a policy you’ll be covered in the event of a fire, right? Well, maybe not.

Here are some ways to protect your property with insurance during wildfire season.

Don’t Set It And Forget It

An automatic insurance renewal every year can take the hassle out of shopping insurance or guarantee you have coverage. You just continue to pay the premiums and if something goes wrong you’ll have coverage.

Ask yourself these questions: In the event of a catastrophe:

  1. Will you have the right insurance coverage?
  2. Will you have enough insurance coverage?

There are a couple of ways you can find out the answers to these questions: hope for the best when a claim occurs, or review your policies at the next available opportunity and talk to your insurance broker.

We vote that you talk to your insurance broker!

Your insurance broker can review your coverage and review your home, personal property and financial situation with you to determine whether the coverage you have is the right kind of coverage and enough coverage to replace your property should the unthinkable happen.

Document, Document, Document

In a disaster situation, it can be difficult to remember what your own name is, much less what brand of TV you just purchased and where it came from. We recommend documenting your home contents in a number of ways.

Videotaping: Every phone these days comes with video capability. Walk around your home taking video of the contents. Be sure to include video of what is inside jewelry boxes, drawers, china cabinets, even the garage. When should you do it? NOW is a good time to do it the first time. If there is a fire coming, do it again before you leave the home.

Home Inventory: You can use the video to complete a home inventory sheet or spreadsheet using any number of office productivity programs. Microsoft offers a Home Inventory Template, or make your own. Be sure to include new items as they come into the home, especially gifts.

Documentation: Write the serial numbers of electronics on the receipts, scan the receipts and store in the cloud or on a jump drive that will not be kept at home. This will allow you to identify damaged or stolen items, including the cost of the item at the time of purchase, when submitting a claim. Pictures are also helpful.

Know How Claims Work

In the event of a break-in or disaster, you will want to contact the authorities first, and then get in touch with your insurance agent. Be sure to keep both your insurance broker and your insurance company’s claims numbers handy to file a claim. With that number, be sure to include your policy numbers for easy reference.

While most policies today are based on replacement cost value, some policies or older homes may be written on an actual cash value basis. What’s the difference?

Replacement cost: This is the value that it would cost to replace an item of like kind and quality at current prices. This could be less or more depending on the item, but will never be more than the amount insured.

Actual cash value: This is the value that it would cost to replace the item with like kind or quality at current prices less depreciation.

Actual cash value costs less to insure but also pays out less in the event of a claim. Unless you are in a financial bind or your items are very old, it is recommended to insure for replacement cost if at all possible.

You should also talk to your broker about how the claims payment process works. While we would all like for our insurance company to write us a big fat check for the insurable value of the policy in the event of a claim, that isn’t how the process typically works.

Most companies will pay out contents claims at 25% or 50% upon receipt of the claim and then will pay the balance after all items have been replaced and receipts have been received and reviewed.

The same goes for building coverage. The insurance company will pay out a portion prior to rebuilding, but will not pay the balance until the structure has been replaced. In the event that a structure is not replaced, the company will pay only actual cash value for the structure, not replacement cost, since it isn’t being replaced. This policy may vary from company to company, so it is important to review this process with your broker or insurance company so there are no surprises in the event of a claim.

Your most important ally when it comes to homeowners or renters claims is your insurance broker. Review your home and contents with your broker and compare that to the coverage you have in place. The best time to do this is NOW, not when the wildfire is knocking on your back door.

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