Check Your Protection
Make sure you're prepared for any disaster
(MONEY Magazine) – Buying insurance is the kind of unpleasant financial task you'd like to do once and then forget about. Don't. A lot may have changed since you last bought home or life coverage. Dust off your policies and ask yourself these questions.
1 - Am I Paying Too Much?
• WHAT'S THE GOING RATE? Visit your state's department of insurance site (find it at naic.org) for sample homeowners insurance rates by company. Or research rates at a national comparison site like insure.com or insweb.com.
• WHAT MIGHT I PAY? Life insurance is much cheaper now than 10 years ago, so if you're sitting on an old term policy, try repricing it--you might save a bundle (even though, of course, you're older now). Visit accuquote.com for estimates.
2 - Do I Have the Right Kind?
• CAN I REPLACE STUFF? Your homeowners policy should cover the full replacement cost of what you own, not actual cash value (ACV). That way, if your TV is stolen, you'll be covered for a new set--ACV only pays what it was worth when it was swiped. If you have an old ACV policy, you'll pay 5% to 10% more to upgrade.
• HOW OLD IS MY HOME? If it's more than five years old, consider law-and-ordinance coverage, which adds some 8% to your premium but pays to bring wiring and other features up to local building codes if you have to rebuild.
• AM I AT RISK FOR FLOODING? Get the answer at floodsmart.gov. If there's a good chance you are, spring for flood insurance, which isn't part of standard homeowners insurance. In a low- to moderate-risk zone, a $250,000 policy on your house, with $100,000 for the contents, costs $350 a year.
3 - Is It the Right Amount?
• WHAT'S NEW? If you've had a child, been divorced or bought your first home since you first got life insurance, you may need more--or less. Use the calculator at life-line.org.
• HAVE I ADDED ON? Did you turn a porch into a sunroom, a garage into a guest room? You might need to increase the limit on your homeowners policy to reflect your home's higher value.
• WHAT WOULD IT COST TO REBUILD? Likely more than you're insured for, even if you have an inflation rider. A local builder might give you an idea, but the Web will do the job as well: You can fill in your home's location, square footage, the year it was built and so on--and get a construction estimate for $19.95--at accucoverage.com and insuretovalue.net.
• WHAT DID I BUY LAST YEAR? Jewelry, a fur, art, a computer? If so, you may have exceeded the coverage cap for that category. You have two options: Add a rider to your policy or specifically list the big-ticket item on your policy (tell your insurer you want to "schedule" it ).
4 - Am I Ready to Make a Claim?
• WHERE ARE MY POLICIES? The best home for those is a fireproof safe. Make sure your spouse or heirs know the combination.
• DO I KNOW WHAT I OWN? Take pictures of your stuff with a digital camera, or a camcorder so you can narrate. Don't forget what's in drawers or boxes. Store that record in a safe-deposit box or at a relative's house.