For most of us, purchasing a home is the biggest investment we will make. It is essential to protect that investment, as well as personal possessions and liability to others while they are on the property. Home insurance is mandatory, but how much is enough? An insurance industry survey in 2008 reported that 64 percent of homes in this country are underinsured, and do not have enough coverage to rebuild their home should they suffer a total loss. Consider the following guidelines when reviewing your insurance needs:
- Be sure to have enough insurance coverage to rebuild your home based on current construction costs, not on what you paid for your home. Do not include cost of the land.
- It is advisable to purchase coverage for personal possessions based on replacement, rather than actual cash value. For example if a claim is filed on a 5 year old TV, actual cash value will include depreciation, and reimbursement may be less than you expect. Replacement cost will replace the TV for the actual cost of a new one, not considering depreciation. Premiums for replacement cost may be higher, but you will receive accurate reinmbursement for your loss.
- Inventory, and better yet, make a video of personal possessions and keep it in a safe place off the property. Evaluate replacement cost and consider adding additional coverage for high value items such as jewelry, fine art and computers.
- In the event that a disaster renders your home uninhabitable, be sure purchase additional living expense coverage to cover hotel or rental bills and restaurant meals.
- Should someone be injured on your property, make sure liability coverage is enough to protect your assets, including other property and savings. Look into an umbrella policy which will extend such coverage to your auto policy.
It's one of those things that you hope you never need, but if you do, you want your insurance policy to be there for you.