| Time to review your homeowners policy
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"If you live in a high-risk area, you want to
buy up," says Hunter. "If you don't and your chances of
getting a total loss are relatively low, maybe you won't."
Which is another way of saying that yes, you can be
over-insured, especially if you're covered to the max and your chances
of a total loss are low.
Over-insuring on appreciation
Bubble check: Another common and costly mistake homeowners make
is buying coverage based on the rapid appreciation of the market
value of their homes. In most cases, your home's appreciation has
less to do with its structure than its location. Since homeowners
insurance doesn't apply to terra firma, you want to only insure
for the replacement cost of the structure, not for your likely selling
price. "Don't let your mortgage company talk you into insuring
your home for a lot more than it's going to cost to replace it,"
Flannagan says. "Your agent has the tools to estimate what
it's going to cost to rebuild your house stick by stick in your
area."
Hot buttons
Insurers don't like to pay liability claims, which can be costly.
So they have taken to inserting exclusions and limitations aimed
at limiting their exposure to lawsuits. Current hot buttons include
mold, dogs, swimming pools and trampolines, all potential big-ticket
lawsuits in the making. Some companies have excluded mold altogether.
If you have or plan to acquire a dog, pool or trampoline, first
comb your policy for exclusions and limitations. Many insurers maintain
a watch list for dog breeds that wind up in court and may exclude
or even deny coverage if you own a risky canine.
Credits and umbrella policies
It's not all doom and gloom out there in insurance land. In fact,
many companies now offer discount credits to homeowners who have
several years without a claim or who bundle their auto, life and/or
health policies with the same company.
The umbrella policy has become an increasingly popular and cost-effective
way to shore up your liability coverage. According to Hunter, for
$200 to $400, you can buy a $2 million umbrella policy over your
home and auto policies.
"Take a high deductible on your property, say move from $500
to $1,000, and if you raise your deductible enough, you can probably
save enough money to almost pay for the umbrella policy," he
says. "You're giving up $500 worth of coverage at the bottom
end to get $2 million in coverage at the top. That's a pretty good
deal."
Shop around
Unhappy with rate hikes? Losing confidence that your insurer will
be around when you need it? Shop around for a new policy. Although
the insurance industry has not made it easy for consumers to compare
apples to apples, many state governments have by providing easy-to-access
buyer's guides where you can view your state's major insurance underwriters
and compare features and prices. Log on to your state's insurance
commissioner's Web site for details.
Jay MacDonald is a contributing editor based in
Mississippi.
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