Homeowner's Insurance
Make sure your policy has you and your property fully covered.
By David Yeske, CFP

In the wake of a string of natural disasters and a rise in other claims across the country (and a declining investment market, add some critics), insurance carriers have been bumping up premiums an average of 15 percent - much higher in some places. Here are a few tips to help you ensure your coverage is adequate, minimize premium increases, and avoid cancellation of your policy.

Understand what's covered. Read the policy carefully, and compare it to other policies. Not all policies cover the same perils, such as electrical-surge damage or certain types of water damage. Most policies don't cover mold, for example.

Submit claims carefully. Some carriers are canceling homeowners' policies after multiple claims - and in some cases, after only a single claim - even when the claims are legitimate. Homeowners in areas with high claim incidences are finding it difficult to get new carriers.

Of course, if you have a legitimate claim you should file it. But if it is not much higher than your deductible, some insurance experts recommend not making the claim. Consequently, the higher the deductible you can afford, the less likely you'll claim small losses that could make you lose your policy. You want to keep it for truly serious damage.

Reassess your deductible. Carrying a $250 deductible when you can afford a $1,000 deductible makes your premium costs higher.

Beef up liability insurance. Homeowner's policies provide minimal coverage if someone injured on your property files a liability claim, but it's often inadequate. Experts recommend increasing it to $1 million. Fortunately, umbrella coverage is relatively inexpensive.

Review and inventory personal property. Typically, personal property is covered up to 50 percent of the amount of coverage on the dwelling. You may want to raise this if you have a lot of personal property or lower it if you don't. Make sure the policy pays for the replacement costs of personal property, not cash value. Go through the house with a video camera and keep a running commentary of the value of items. Better yet, keep a computerized record (with a backup record off property) listing values, serial numbers, and so on.

Get riders or floaters for items such as jewelry, computers, pianos, artwork, antiques, etcetera. Get appraisals for items like jewelry and antiques.

Don't forget those remodeling projects. Your home also may have risen in value because you did extensive remodeling. Inform your agent when these projects are completed and have the coverage beefed up appropriately.

Guaranteed replacement value is a vanishing feature. Many homeowners don't know this, but most insurance carriers no longer provide guaranteed replacement value coverage, which pays for rebuilding regardless of the insured amount. Read your policy carefully. It likely covers "replacement cost," a figure based on the stated replacement value of the house.

Pay attention to vacation homes. Vacation homes can complicate your insurance. Your principal residence and your vacation property may be in different states, with different insurers. This makes it easy to have gaps in coverage, for you to forget to renew a policy, or to move personal property between residences and forget to update your policies.

Try to consolidate the policies with a single carrier, which reduces the potential for oversights and reduces premiums. If you can't do that, have a single financial adviser review all your policies to be sure you're adequately covered.

Vacation homes commonly are located in areas vulnerable to disasters: hurricanes, fires, floods, or earthquakes. These require special riders or separate policies. Flooding, for example, is not covered by a standard homeowner's policy.