This morning I awoke to the sound of a loud fire engine siren signaling a strong warning. It was code, I later learned, for all firemen out. The home they had been trying to save had gotten too hot, and their mission shifted from trying to save the structure to trying to contain, and eventually put out, the fire before it spread to the neighbors’ lots.
You hear about fires but when you’re confronted with one that consuming it really drives home the depth of potential losses. In the case of my neighbor’s home, thankfully there was no one inside and so no risk to lives. But once you know everyone’s safe, your mind turns to the property itself, and the contents within. If it were my home, what would I hope most to save?
Family photos, definitely. Jewelry. The ever-present laptop. Artwork? Or the random things that hold memories like the handmade area rug I picked up on a trip to Istanbul before I got married…
And as the fire dies down into embers, you think, how does one rebuild?
It’s funny how quickly the practical lines of thought kick in with that question: Homeowner’s insurance. Is mine adequate? Did I ask all the right questions? What haven’t I thought of?
So I called the owner of my insurance agency, Mike Jansen of Sanviti Insurance Agency, and asked him: What are the three most common mistakes homeowners make when buying a policy?
Here’s what he had to say:
1. Underinsuring one’s home
“When people buy insurance, they’re not thinking about the devastation. They’re penny wise and pound foolish sometimes. The hardest thing to get people to accept is the house cost. People say, ‘why am I insuring for more than what I’m paying for the house?’
“We do a cost estimator. We have to determine the cost of replacing the dwelling in the event that it was a total loss. Unique features of a house a lot of times are not factored into the actual cost prior to the loss. For example, older structures have unique characteristics like using horsehair plaster. No one does that anymore. They use wallboard. But under the contract, the insurance company has to replace it with a similar value.
“Sometimes when people are shopping for insurance, they’re looking for the bottom line. You get what you pay for.”
2. Not asking whether they’re in a flood zone area and therefore whether they need a separate policy to cover flooding
“Homeowners may not be asked if they’re in a flood zone area. It’s an additional coverage policy not included in a homeowner’s policy. Anybody that lives along the seaport has to have flood insurance. You can’t buy a house without it. But even inland you might need it. If you live near a stream or river, there’s a potential for flooding. A few years ago in New Hampshire houses washed away from rivers overflowing. When you have a tremendous rainstorm, drains can’t take it and things back up. Neighborhoods get isolated because of water. Water seeps into people’s houses.”
3. Failing to insure valuable items separately
“People don’t often think of insuring valuable items as a separate item. People think of these things after the fact. Artwork, jewelry, musical instruments – those are basically the things that people ask [for reimbursement] from the insurance company. You can have a higher deductible to offset the cost of having the proper insurance. The standard deductible now is $500 or $1,000. Your best pricing mechanism is around $1,000 or $2,500, depending on the amount of coverage on a house.”
One other feature to consider: Ordinance or Law coverage. When you rebuild, any new structure will have to comply with current building and zoning laws. Compliance with current regulations might result in additional costs -- and not all of those might be covered under the homeowner’s insurance. So when buying a homeowner’s policy, particularly if the house is older, check to find out whether ordinance and law coverage is included.
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