MAKING SENSE OF INSURANCE
BY JENNIFER TUDOR
It’s that dreaded nine-letter word—insurance. We’ve all got it, in fact, some
of us have lots of it and it’s one of life’s “necessary evils”. But how many
people truly understand the policies that we pay for year in and year out?
Let’s take a look at the basic homeowners policy. For most, our homes are
our largest assets and as such we want to protect them. Your homeowners
insurance policy then should be set up to protect that prized asset, and
prevent financial loss to you, the homeowner. But what does that really
mean? Have you ever tried to navigate your way through your policy
in hopes of better understanding exactly what is covered and what you
are shelling out all of this money for? If you have, you’ve probably given
up about halfway through the first page. Today, let’s take a moment to
examine the basics.
First, your policy is set up to protect the structure itself which is outlined
under the “dwelling” portion of your policy. Remember this value reflects
the amount to which it would cost to replace the existing structure. Items
such as land value, lot premium, and/or purchase price are not good
indications of what should be evaluated when calculating this value. In
addition, this will cover any other items physically attached to the home,
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such as a pool. While we are addressing pools under the property coverage
portion, another important item to consider is the pool cage. Many carriers
insure the pool cage only by endorsement (an add-on to your basic policy)
and some will not offer coverage to this item at all. As damage to or loss of a
pool cage structure is extremely high in the event of a hurricane, be sure to
check your policy to verify that it includes this valuable coverage.
The next coverage, which may or may not apply is your “other structures”
coverage. This item is set up to protect any structures that are not physically
attached to the main structure—detached garages, fencing, workshops, or
a shed. Many carriers will include this coverage as an automatic percentage
of the dwelling coverage, generally 2-10%.
Another item to review carefully is your personal property coverage. This
will cover the loss of any personal belongings, furniture, and electronics.
For this item, there are two types of loss settlements- replacement cost and
actual cash value. With the actual cash value option, your belongings are
covered for their current replacement cost minus depreciation. Depreciation
will be determined as the total decrease in value of an item due to its age,
condition and other contributing factors. The second and most common