Will your insurance cover you if you have a fire or if your home is destroyed in a disaster? These are some of the questions to ask your insurance agent before disaster strikes.
One of the leading public insurance adjusters in Southern California, Quality Claims Management Corporation, does not sell insurance or recommend specific insurance companies or agents. Quality Claims Management works with homeowners and businesses who need help valuing, adjusting or negotiating an insurance claim after a disaster, and believe that the best solution to insurance problems is to be properly insured BEFORE a disaster.
Here’s a checklist to help make sure you’re protected.
Is the policy a replacement cost or actual cash value policy?
Replacement cost coverage will pay the amount it costs to replace your property.
Actual Cash Value (ACV) will pay you the fair market value of the property, which usually means the insurer will pay you a depreciated amount based on the age of the property.
Replacement cost coverage is preferred and most common.
Does the insurer offer Guaranteed Replacement Cost Coverage or Extended Replacement Cost Coverage?
There are only a few insurance companies in California that offer guaranteed replacement cost coverage and it is preferred over any other coverage. It will pay you the full amount it costs to repair or replace your property, even if it costs more than your policy limits.
Extended Replacement Cost Coverage adds a certain percentage above your stated policy limits. The policy can add 50% or 100% additional coverage above the established limits of the policy. This coverage is added by an endorsement and will contain certain additional conditions that must be met to obtain this extended amount. Be careful here as the language of the Endorsement may limit your coverages.
Determination of policy limits
Base the amount of coverage on the replacement cost of your property. This can be tricky to calculate. Be sure to use “rebuild” costs, not “new” construction costs; there is a big difference.
Make sure the limits include the additional amount needed to meet current building code requirements.
Contact a building contractor or real estate appraiser to see how much it costs to build your home.
Do not base the limits on the amount of your mortgage
Your mortgage lender may require you to insure your property for the replacement cost of your property up to the loan amount. They cannot require you to insure your property for more than the replacement cost value amount.
Your loan is generally based on the total value of your property, which includes the value of the land.
Your homeowners policy will only insure improvements to your land. In addition, your policy will include other coverage, but it does not include the land itself.
Did you correctly identify your property?
Do you have the correct address?
Do you have the correct number of square feet listed?
Did you include the type of construction?
Did you identify any improvements to your property, such as the kitchen or special services?
floors, windows, etc.
Did you include all structures on your property, such as custom, custom decks, pools, guest house, long driveways or fences?
Do you have extensive gardens or expensive plants?
Do you have any special equipment or personal property that may need higher limits?
Do you have any collection or collectible items?
Do you have valuable artwork, antiques, jewelry, furs, firearms, or any other items
that they need to have increased limits?
Do you have a boat that needs to be covered by this policy?
Does the policy include ordinance or law coverage, also known as a code update?
If you need to rebuild your property, you will need to comply with the current building code requirements.
If you have an older home and do not have code improvement coverage, your policy will not pay for the additional cost of construction to meet current building code requirements.
Do you operate a business from your home?
If you operate or run a home business, be sure to ask if an endorsement is required to cover your business equipment.
Make sure you have enough liability coverage
If you have a pool, a dog, or anything else that might create some additional exposures, consider increasing your liability limits.
You may want to inquire about a blanket policy. An umbrella policy will increase your liability limits for homeowners as well as auto policies. General policies are very affordable.
Don’t limit your search for coverage to a direct coverage agent: talk to an independent broker or agent
A direct writer will only be able to offer coverage for one insurance company, the one they work for.
An independent agent will search many different insurance markets to find the best coverage options and insurance rates specific to your needs.
talk to your agent
Take the time to fully describe to your agent what your property consists of. Submit a written follow-up explanation of your property. Invite the agent to come to your property for a visual inspection.
Be prepared and remember to ask questions.
If you don’t ask, you may be underinsured or inadequately insured if disaster strikes. According to Amy Bach, executive director of United Policyholders, “Most people who lose a home in a natural disaster find out the hard way that they don’t have enough insurance. After the 2007 San Diego County wildfire, 75% of victims found themselves underinsured at an average of $250,000.”