How Much Do You Really Need?

  • By Andrea Zinser Contributing Writer

Whether you talk to Jim Langley of Langley Insurance & Associates, Daniel Clermont of Morrison & Miller, Inc. or Chris Rowell of Rowell Insuring, the message is the same. Insurance premiums continue to increase and policy guidelines are becoming more detailed and much tighter. The issue of homeowners’ insurance, a coverage once taken for granted, has become a question of affordability and availability. Due mainly to the large number of catastrophies, the higher cost of building materials and increased legal and medical costs, insurance rates are soaring.

Unfortunately most of us wait until after a disaster like the 1998 Ice Storm to find out whether we are covered. That is when we begin to understand what insurance coverage we actually have, especially when other peoples’ claims get paid and ours don’t. It is much better to consider a number of things beforehand.

• Know what you have and know what is covered — including the structure of your house, your belongings, your liability to oth-ers and your living expenses — in case you are forced to leave your home.

• Get replacement value insurance and keep pace with inflation. You won’t care about the fair market value once everything is lost. You will want to be able to replace everything and re-build your home. A house that cost $100,000 to build a few years ago may now cost $20,000 to $30,000 more. Check whether your insurance company has inflation guard or whether they offer extend-ed-replacement-value which usually covers 100 percent of your home’s value, plus a certain percentage for rebuilding in the current market.

• Understand the claims process. Do you get the entire amount up front or just part of it? Sometimes you only get paid after you have replaced the items and have the receipts to prove it.

• Take inventory. In case of loss you will have to prove what you owned and how much it was worth. This is a lot easier when you still have everything and can tape it with a video camera.

• Consider extra coverages, such as flood or earthquake, which aren’t included in your regular insurance policy. It pays to find out how much extra these would cost.

Today’s sluggish stock market does not help insurance companies offset losses. In addition, new issues keep surfacing — for example mold and mildew-related claims — which opens up a whole new spectrum of health hazards. All this has led insurers to apply much tighter and in depth rules. Chris Rowell explained, “Nowadays it is not the amount of a claim but the frequency of claims that counts.” Clients, who show two claims in three years or three claims in five will probably find themselves considered a high risk and will likely be terminated at the end of their contract. Chris added, “I suggest my clients raise their deductible as much as they can and take care of the small losses themselves.”

Jim Langley doesn’t believe his clients need to raise their deductible, but he does believe they should take care of small losses without filing a claim with their insurance carrier. “In the end it comes down to what people can afford.”

Jim pointed out another important fact. “The market is very tight today and I advise clients to make their payment on time, oth-erwise they risk immediate cancellation of their policy.” Under those circumstances, finding another insurance company will likely be very costly.

While the location and the cost of your home are still major considerations, a whole list of other factors now figure into the cost of insurance. Dan Clemont said, “Regulations are much more stringent nowadays. For example, if you own a dog breed known for its biting history — like a Pit-bull or a Rottweiler — you won’t be able to obtain a policy. Buried oil tanks can become an issue, too, as can gates or fences around pools.”

There are other risks, too. Chris emphasized that woodstoves are considered high risk, as are three or more steps in front of your house unless you have a handrail. Jim pointed out that companies won’t insure trampolines anymore, even those with safety enclo-sures.

Even if potential customers navigate all these issues, they should be aware that they will be thoroughly scrutinized by the insur-ance company before they receive a policy. Three criteria are being used: Clue, Score and Former Losses. Clue stands for Claims Loss Underwriting Exchange and it gauges the risk of each potential customer and establishes the rates. Score analyzes your credit record. Former losses refer to any previous claims. When you buy a home you might want to check to see if it has a history of in-surance claims.

If you run into trouble obtaining insurance, the New York Property Underwriters Association can be your last resort. In exist-ence since 1968, the group helps people who cannot obtain regular insurance.

Do you need an umbrella policy and how does it work?

Consumer lawsuits have become commonplace, and while they range from the serious to the frivolous, the day may come when you need coverage. Umbrella policies — also known as personal liability policies — can supplement the liability coverage you already have. An umbrella policy normally pays after the liability insurance in your homeowners (or auto) policy runs out. Chris believes this type of policy is a good idea to help protect your assets. “If your home liability covers up to $300,000, the umbrella policy will pay claims above that amount, up to the limit you have chosen.” He explained, “You can purchase a $1 million policy very reasonably.” If you are stuck with a lawsuit, it is a small price to pay. Even frivolous lawsuits cost you the expense to defend yourself. Also remember, an umbrella policy not only raises your liability limits, it also covers you if you cause bodily injury, property damage or personal injury.

Is an umbrella policy right for you?

Before you consider purchasing such a policy you might want to consider raising the liability limit on your regular insurance. Or if you fall into a very low risk category and a lawsuit is unlikely, an umbrella policy probably won’t be worth it. However, in the case of a problem, if you have significant assets to protect, you could be happy you have an umbrella policy.

Identity Theft 101

Until recently only two insurance companies offered identity theft insurance policies. Now protection ranges from credit moni-toring to fraud alert services. The problem of identity theft has grown (Who hasn’t heard horror stories in the media), and so has the industry designed to prevent and protect you from the crime. Some companies will, for a price, offer an early warning system, pro-vide user-friendly credit reports and access to driver’s license and medical information records. These companies will work with you to repair your credit problems caused by identity theft. Others, including some credit card issuers, offer fraud alert packages that include firewall software, digital hacker alerts and documentation registration for your credit cards, insurance policies and bank records. Just remember that credit bureaus and the Federal Trade Commission provide a number of these services for free and that you can take common sense steps such as shredding important documents and monitoring your own credit.

Opting for identity theft insurance can make sense, when you consider it can take the average victim approximately 175 hours and about $1,500 to clear up the mess. Dan Clermont thinks the policy is well worth the investment. “At least it will cover your expenses for notarizing affidavits and postage, re-establishing credit and the cost of getting a new driver’s license.”

Depending on how long the fraud or theft has been going on, Chris Rowell says, “You will probably need to take time off from work to resolve the case. Identity theft insurance provides you with up to $500 a week salary for as long as four weeks.”

It is not only through credit cards and computers that identify theft is being committed. Not too long ago, several of Jim Lang-ley’s clients found out that auto theft goes hand in hand with identity theft when their credit cards and driver’s licenses were stolen along with their vehicle.

Even if you carefully check your credit card statements and protect your important papers, your license and credit cards can be stolen. A policy helps you re-establish your credit swiftly and it can help you regain your credit standing.

Once you have found an insurance policy that best suits your needs, it is a good idea to periodically review your coverage to make sure that it keeps pace with any improvements you make to your home or other assets. To do this, your insurance agent can be a great help.

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