Homeowners Insurance: Do an Update Before a Problem…Not After

Westcoe Realtors, Riverside California…As Realtors, we are definitely not in the insurance business, and could not even remotely advise our clients on the various amounts and types of homeowners insurance coverage available.  However, we are in a related business, and therefore while we cannot give you specific counsel, our experience can give us a unique insight into some of the issues you may need to discuss with your personal insurance agent…and having known of clients who have lost a home and possessions to fire, it is far better to discuss this issue now as opposed to later.

When an escrow closes, every time there is a new loan on the property (which is almost always), the new lender requires the home to be insured against fire for at least the amount of the loan.  Understand that all they are concerned is the loan amount, not any equity you may have, and certainly not any of your possessions.  Many buyers simply get the insurance required by the lender, and then assume they are covered for whatever happens.  Not really.

First, some insurance policies automatically increase the coverage you have on your home as the real estate market increased in value, and some do not.  That means some homeowners who have owned their home for a long time may have woefully inadequate insurance coverage.  What worked 20 years ago probably does not provide enough protection today.  Conversely, some people who who purchased their home in the past few years may have too much coverage, as values have declined.  You will still need to have enough insurance to cover the loan amount, but maybe you could save a few dollars by reducing your amounts.  The bottom line here is to check with your insurance agent.

Also, do not forget the cost of replacing all the items in your home.  Most of these have been accumulated over time (furniture, appliances, electronics, clothes, linens, art, etc.) and if you had to replace them all at once, the cost gets ugly very quickly.  The sticker shock at having to replace all of the above at one time is bad enough…but if you haven’t kept your content coverage high enough to buy all this new “stuff”, then it gets even worse.

The other part of contents coverage is both remembering what you had, and proving you had it.  Quick…pick a room in your house and mentally try to write down everything in it.  How much did you miss?  If you are like most people, when you compare your mental list to an actual inventory, you will be amazed at what you missed.  Now…file a claim and try to not only remember what you had, but prove you had it to your insurance company.  Much tougher.  A good rule for dealing with this issue is to take a camera and do a quick trip through your home…snapping photos of every room and every closet.  Don’t forget the closets.  It is easy to do, and once you have the photos, you can both remember what you had, and prove it to whomever it may be necessary.

Also, we get asked about earthquake insurance all the time…and there is no universal answer we can give you.  Again, you need to check with your personal insurance agent.  We do know the deductibles are a little different with earthquake insurance, so be sure you understand what is happening there.  Whether you obtain this type of insurance or not is your call.  We can only tell you it is available and have you take it from there.

 In the end, all we wanted to do today is to jog your memory a bit and have you make a call to your insurance agent to make sure all your coverages are where they should be.  Losing your home and contents is a tragic event…but let’s not have it be worse with inadequate insurance coverage that may keep you from reclaiming your normal life when all the dust settles.