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Home insurance policies are long, complicated and
written in legalese. But it can really pay to know what's in yours
and how it works.
"Insurance is a complex product and there's no
harm and no shame in not fully understanding it," says Alessandro
Iuppa, president of the National Association of Insurance Commissioners
and superintendent of insurance for Maine. "Most people don't
read a policy until they've had a claim denied, and that's too late."
| Here are some key components to highlight when you
read your policy or discuss coverage with your agent: |
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Finding
an insurer
Get recommendations from friends, relatives, co-workers
or other people you trust. Be sure to check out
the companies. And to compare insurance policies
and quotes, visit Insureme.com, a Bankrate company.
If your state keeps information, complaints or complaint
ratios, weigh that too. You can find information about how to contact
your state insurance office at www.naic.org.
Make sure the company is on strong financial ground so it will be
there if you have to file a claim. Check its ranking with A.M.
Best Company.
Your dwelling
You want to be sure that if you had a total loss of your home tomorrow,
your insurance policy would pay enough to build the exact same house
in the same spot.
Don't just focus on what you paid for the home. You
want enough insurance to replace it, right down to that funky wallpaper.
"It's common sense, but it's not what people
think about," says Tena B. Crews, director of business education
at the University of South Carolina and author of "Fundamentals
of Insurance."
You also want to consider how home values and construction
costs in your area would affect you if you needed to rebuild.
"If you're living in a community or area where
values have been skyrocketing, you want to be sure you have a replacement
policy that will provide sufficient resources to rebuild,"
says Iuppa.
If you've made any renovations, talk to your agent.
Find out what he or she needs to document the changes and the value
you've added to your home.
Replacement
value
After a loss, if you want the insurance company to reimburse
you for the cost of a new version of your possessions, then you
want replacement value insurance for your belongings. In other words,
the company pays you to replace what was lost.
But you might have to request it because not all policies
have replacement value as the default coverage. Beware of policies
that promise "fair market" or "cash value."
That means the company will give you the current value of the item,
which will include wear and tear and depreciation. It also can make
more work for you during a claim, since you have to substantiate
not only the fact that you owned the article, but also what it was
worth when you lost it.
It also pays to ask how your company handles claims
with replacement value insurance. Some firms want you to purchase
the new item and show a receipt before reimbursement. If that's
the case, how much time do you have? (If you're living in a motel
room while you rebuild the house, you may not want to replace the
giant entertainment system right away.) And if you decide not to
replace the item at all (you never really liked Aunt Minnie's green
frog vase), how will the company reimburse you?
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