Top 5 Insurance Tips
By Elizabeth Dougherty
Walking through the rubble of a house
destroyed by a tornado, hurricane or fire is not
the time to wonder whether or not the damage is
covered. Whether you are buying a house or already
have one, you need to take a moment and think
about insurance- now.
What could be more boring and unimportant
than reviewing homeowners insurance? Aren't all
policies pretty much the same? Reviewing home insurance
is about as much fun as a root canal. That
is probably what most of the homeowners in New
Orleans thought before Hurricane Katrina devastated
their homes. Homeowners in Enterprise probably
thought the same way, too. None of them think
that way now. Homeowners insurance is important.
Make sure you know your policy, your company and
your agent – BEFORE anything happens.
While most people get homeowners coverage
from a national company, each state has different
laws and different regulations for insurance companies.
In Alabama it is the Alabama Department of
Insurance and their website at www.aldoi.org that
has not only the basics, but also who to contact if
you have more questions.
Below are the TOP 5 Tips for buying homeowners
insurance here in Lee County.
1 Pick the right company
While it is important to get competitive
quotes, it is vital to pick a company that is both
financially strong and has a history of paying claims
to consumers. Do research. A good starting point is
www.jdpower.com/finance.
2 How much coverage do I need?
Most homeowners are underinsured. Your
mortgage company will insist upon you having
homeowners insurance before they are willing to
hand over a few hundred thousand dollars at closing.
Wrongly, most homebuyers think that whatever
satisfies the mortgage company must be the right
amount of coverage. The Mortgage lender is only
concerned about getting back their money. The
amount they require may not be enough for you to
rebuild your house and your life.
3 Know your policy
Is your policy based on replacement cost or
actual cash value? The difference can be tens to
hundreds of thousands of dollars. Replacement
cost is just that - the amount of money it would
take to rebuild your house, or repair damages, with
the same material, quality and care as you did in
the beginning. This is a good thing.
Much worse is "actual cash value.” While this
sounds great it is not. This figure takes into account
the amount AFTER depreciation. If your 17 year old
roof is damaged, "replacement cost" would replace
it. "Actual cash value" would give you a pro-rated
amount based on the projected life of the roof
MINUS a figure for the age of the roof. This can be
disastrous.
Also, be careful because most policies cover
your personal property under the "cash value
method" where you may get pennies on the dollars
you spent.
4 Stay local
Get an agent who knows the area. If something
happens do you want to call a 1-800 –"put
you on hold forever" number? Or, would you rather
call a real human being who lives here, works here
and takes care of clients from here? Know your
agent and company.
5 Know what is not covered
So you think your policy covers water damage.
How about damage from a broken pipe? What if
it was a leaking pipe? What if it was from a tree
through the roof? What if it was from a leaking
roof? What if it was "wind driven rain" that came
at the house almost horizontally? These are all
different.
Luckily, Lee County is not really susceptible to
earthquakes (although Birmingham has had a few),
but what about tornadoes, hurricanes and fl ooding
rivers? Find out now.
Here's an extra tip. Make copies and video (or
digital) recordings of everything and keep them in
a safe place – not your house. A picture (and a few
serial numbers) may be worth thousands of dollars
when it comes to claims.
Elizabeth Dougherty, a resident of
Auburn, is a former Real Estate Broker
and Mortage Broker. She can be
reached at EADougherty1@aol.com.
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