Volume 3, Issue 5                     The Traut Firm eNewsletter             Nov 2008            www.trautfirm.com

HOMEOWNERS’ INSURANCE—DON’T GET CAUGHT SHORT

Today it is important to make sure that your largest asset, your home, has the right insurance coverage. Why? Because even though home sale prices have declined recently, the cost to rebuild your home hasn’t. If you should suffer a catastrophic loss from a fire or other calamity, you could wind up paying for a substantial portion of the repairs out of your own pocket. So it’s essential to insure your home for the amount of money it would take to rebuild it and to make sure you have the best possible coverage.

Do I have enough coverage?

Many homeowners took advantage of the housing boom to remodel their homes, but they didn’t update their insurance policies to cover the improvements--even though some policies require homeowners to notify their insurer when they make upgrades.

So if you’ve made any of the following kinds of changes, contact your insurance carrier and update your policy limits.

• Remodeled your home:  e.g., significantly updated your kitchen, bathrooms, or built-ins.

• Significantly upgraded your home’s features:  e.g., expensive flooring, countertops, or improved roofing.

• Added square footage:  e.g., a new family or media room.

Do I have the right coverage?

Insurance companies typically settle losses in one of the following four ways. Review your homeowner policy or talk to your agent to determine which applies to you.

• Guaranteed replacement-cost coverage. The insurance company pays the full amount needed to repair or replace the damaged or destroyed dwelling. Even though this is the most comprehensive form of homeowner coverage, relatively few companies offer it.
   

• Extended replacement-cost coverage. The insurance company pays to repair or replace the damaged or destroyed dwelling up to a specified percentage over the policy limit usually 15-50 percent. For example, if your home is insured for $100,000 and the limit of extended coverage is 25 percent, you would receive up to $125,000 to cover a loss.

• Replacement-cost coverage.  The insurance company pays to repair or replace the damaged or destroyed dwelling up to the policy’s limit.
   

• Actual cash value. This is the least comprehensive provision. It pays the replacement cost of property minus depreciation, up to the policy limits.

Summary

Having sufficient homeowner insurance is crucial to your financial security. If you’re not sure whether you have the right coverage or high enough limits, ask your insurance agent to reevaluate your coverage and adjust it accordingly. And when choosing homeowner insurance, choose an insurer with a reputation for good customer service and for settling claims promptly and fairly.

For more information, call The Traut Firm at (714) 835-7000. We will be happy to discuss the matter with you.

The Traut Firm
"When You Mean Business"