I know everyone gets busy, and insurance is often the last thing on our minds. However, it’s important to evaluate your insurance coverage and make sure you have the necessary coverage in case you ever need to use it. I was fortunate when I had to make a claim on my insurance. My middle child had just bought a car, and I was adding him to my policy when the insurance company convinced me to bundle my coverage with them. I updated my homeowners insurance, and we revised the values of the coverage.
There are different types of coverage you need to consider, and it’s essential to ensure that each is sufficient. First, there’s dwelling coverage, which only covers your home in case of an incident. You want to make sure you have enough coverage to fully replace your home should something happen. Think of it this way: if your home is destroyed, do you have enough coverage to rebuild it given the skyrocketing construction prices today? If not, you may only be able to rebuild part of your home, and you would have to cover the rest.
Next, there are other coverages for things like other structures, which includes detached garages, sheds, or gazebos. Then, there’s personal property coverage. If your home is destroyed, your personal property is also at risk. Do you have enough coverage to replace everything inside your home?
It’s also important to know whether your policy offers ACV (Actual Cash Value) or RCV (Replacement Cost Value) coverage. ACV tends to have a lower premium but may leave you paying a lot out-of-pocket when you replace items. RCV, on the other hand, covers the actual cost to replace an item. For example, if I bought a jacket for $100 and it was destroyed in a house fire, my insurance might initially assign it a value of $40. If I then buy the same jacket online for $150, I can submit the receipt, and the insurance company will reimburse me for the full replacement cost—$150—not the $40 they originally valued it at.
Another important coverage is loss of use. This is vital. If your home is destroyed, where do you go? Loss of use coverage will pay for temporary housing, such as a hotel or apartment, and even for furniture rentals while your home is being rebuilt or you move to a new place. Without enough coverage, you could be forced to stay with family or even live in your car.
These coverages are often overlooked until we need them. I recommend reaching out to your insurance company and updating your coverage to reflect what you actually need. This way, if you ever need to file a claim, your policy will perform the way it’s supposed to.
In one of my upcoming posts, I’ll share some important lessons I learned after having a house fire. I’ll discuss what you should do right away before filing a claim, so if the worst happens, your situation will be easier to handle. I’ll also talk about repair companies and disaster mitigation. When this happened to me, there wasn’t much information available, and I found it hard to find useful advice. Now that I’ve been through it, I can share my experience, so others can benefit from what I learned.
