SIX COMMON HOME INSURANCE COVERAGE GAPS

IS A STORM, FLOOD OR (HORRORS!), TORNADO IN YOUR FUTURE?

Earthquakes, unexpected deductibles, and flooding are just a few of the costs your homeowner’s policy might not cover. But if you're like most folks, you probably don't realize it.  According to the MetLife Auto & Home Insurance Literacy Survey, many homeowners are clueless about the ins and outs of their policies, which means they could easily end up paying a lot more than they expected after damage to their home.

Almost half of all homeowners in the survey didn't know how much insurance coverage they had for the contents of their home, and 1 in 3 didn't know the amount for which their home was insured.  This "knowledge gap" can lead to costly surprises and it is recommended that homeowners review their policies more closely.

Here's a quick way to test your knowledge on six common coverage gaps:

1.  Do you think your insurance policy would reimburse you for earthquake damage?

The answer is almost always "no," unless you purchased a separate earthquake policy.  Almost thirty percent of survey respondents thought the answer was "yes," and another thirty percent didn't know.

2.  If your sump pump backs up and your house floods as a result, will your homeowner’s insurance policy reimburse you for the damage?

Despite the fact that most people believe the answer is "yes," it is unfortunately not the case. That means homeowners could have to shell out cash for costly repairs, unless they specifically added (and paid extra for) coverage for sump-pump failures.

3.  If new building codes mean you need to upgrade undamaged parts of your house, will your policy reimburse you for those costs?

While nearly 2 in 3 survey respondents said "yes," the answer is "no". In most cases, policies don't pay for upgrades, even those that are mandated by new laws, in undamaged parts of homes, unless you take out additional "ordinance or law" coverage.

4.  If you go away for the winter and your pipes freeze and break, will your policy cover that damage?

While policies remain valid even when you're on vacation or away for a long time, you have to take certain steps to protect your home, or you might be liable for the costs. For example, if you fail to keep the home heated or pipes drained; any damage that results from freezing might not be covered.

5.  Say you have auto and home insurance with the same company and both get damaged in a tornado. Will you pay one deductible or two separate ones for each item?

Chances are you need to pay two deductibles, even if both the house and car are damaged by the same storm.   There are a handful of insurers that will cover this – it’s wise to check ahead of time.

6.  If a fire destroys your house, will insurance pay the full cost to rebuild?

The answer is most likely "no," because most insurance policies cap their coverage—and take depreciation into account when calculating the value of personal possessions. That means homeowners could be insured for far less than they think. Seven in 10 survey respondents said they thought their policy would pay the full cost to rebuild after a natural disaster.

While these gaps could end up costing homeowners a lot of money, policies also provide coverage that many people don't realize they have. For example, policies usually cover the belongings of college students (the sons and daughters of policyholders) who live on campus. They also often cover electronic data (including music) and damage to appliances caused by a power surge.

The bottom line? Policies vary, and if you have a particular concern, it's usually relatively easy to add additional coverage to your existing policy—as long as you know about the risk before any damage takes place.

During one of the terrible storms we had this summer, lightening struck my beautiful, old oak tree.  I was grateful for the insurance that helped with the cost of repairs & removal.  It’s easy to overlook the emotions that accompany a loss – you don’t want’ to add frustration & financial loss to a tough situation.

I just had a review of my insurance with Mike, my insurance guy.  You, too, should take a moment and call your insurance broker to be sure you have the best coverage for your needs and wallet.  Don’t have an insurance guy (or gal)?  I’ll be glad to share my resources with you – give me a call or send me an email.

Source:  US News & Work Report, August, 2012

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