Insurance Checkup

Years ago, I would sit at the dining room table doing homework when Mr. Seal would come for his annual visit to review my parent’s insurance policies.  Today I am grateful for the service he provided my parents and to me.  When our home was burglarized in the late 80’s, he was there to walk them through the process.  Fortunately, that is the only time my family needed the policy.  Insurance is one of those things we buy with the hope that we never need it, much like a fire extinguisher or a spare tire.  It’s also one of the most important and responsible things we can do for our families and it is one more critical step in the preparedness process.

So today, I spoke to several insurance professionals about the steps they would recommend including in an annual “Insurance Checkup” and added it to a list of my own to come up with the following checklist:

1. Inventory Your Home:  A video recording of your belongings and a corresponding spreadsheet detailing each item will be invaluable in the event of a disaster.  The more detail you can provide the insurance company, the smoother the claims process will go.  With the technology that is available today, you can store a copy online and on a flash drive or DVD in a fireproof home safe or safe deposit box.  A spreadsheet should further document the items included on the video inventory and any that are left out.  Be sure to print out a hard copy of the inventory with photographs of the items, as well.
2. Save Your Proof of Purchase:  The claim filing process should go smoothly if you can provide proof of purchase in the form of sales receipts, credit card statements, or cancelled checks.  Including the model and serial numbers, when available will also help speed things along.  In the event of theft, it helps the authorities track stolen items, as well.   Some banks allow customers to view cancelled checks online for up to six months.  Be sure to print out copies to store with your inventory.
3. Inventory Everything:  Be sure to include everything in your inventory. People often forget seasonal items or sporting goods since they are stored away.  It can be very expensive to replace three Rubbermaid containers of Christmas decorations, hockey equipment, golf clubs, or camping equipment.   Be sure to list it all, including your emergency preparedness supplies!
4. Add Riders:  As you add items to your household, be sure to check your insurance policies and secure a “rider” if one is needed.   Collectibles, jewelry, and heirlooms may not be covered by a traditional policy.  A “rider” may not replace the irreplaceable, yet it will ensure you recover the true value of the item.
5. Store Three Copies:   Most of the insurance professionals I consulted recommend storing three copies of your policies and inventories.  One copy should be stored in a fire proof and waterproof safe at home. One copy should be stored with a family member out of the area.  And finally, one copy should be in your “Go Bag” or the emergency bag that you will take in the event of an evacuation.  If you want to be extra prudent, keep an additional copy in your car and stored securely online. In each package, be sure to include the 24-hour contact information for your agent and the insurance carrier’s claims department.
6. Understand Policy Coverage:  It is critical that you do so.  It might be interesting to know that most homeowners/renters policies in California do not include earthquake insurance.  Other areas may exclude flood or fire.  Be sure to read the fine print.  Most companies will provide the additional coverage at an additional cost.   Be sure to understand the difference between “replacement value” and “cash value”.   The “cash value” policy will include a depreciation schedule that you want to consider carefully. .  The “replacement” value policy may cost up to 25% more, yet the peace of mind may be worth the price.  Also, be sure your policy covers any pets in your home and your college student living on campus.
7. Include Temporary Housing Costs:  No matter the disaster, check your policy to ensure that temporary housing costs are covered.  You will still have to pay the mortgage even if you are unable to live in your home.  It is crucial to have the extra coverage, especially in the event you are displaced geographically for an extended amount of time.  Ask anyone who was affected by wildfires or tornadoes in recent years.  It makes all the difference in the recovery process.
8. Evaluate Your Policy Annually:   The best time to review your homeowners or rental policies is when you are preparing to file your income taxes.  It’s also a good time to call your auto insurance and ask for a better deal.  You will know what you have spent money over the previous twelve months to add new purchases to your inventory.  Also, if you have a child going off to college or already there, be sure to inventory the items they are taking.   Most policies will cover them.  It’s one more reason to check your policy on an annual basis.

Agents from State Farm, AAA, Liberty Mutual, and Farmers provided input in compiling the checklist above.  I encourage you to research the best company and agent that meet the need of you and your family.  The 2011 JD Powers & Associates Study of Customer Satisfaction with Homeowners Insurance is provided as a reference.  Keep in mind that insurance rates and regulations vary from state to state.