The inner workings of homeowners insurance are pretty much a mystery to everyone but die-hard financial braniacs. Many don’t know if their coverage is “replacement” or “cash value.” They don’t know that Grandma’s cherry buffet may not be covered, and, almost certainly, the average homeowner does not have a necessary, detailed inventory of their possessions.
Many homeowners skate by on their ignorance. They may go years without filing a claim, or the claim may be so small as to not be disastrous. Once the damage is done, ignorance becomes more of a liability than that 200-foot poplar that finally came down on the neighbor’s house. Die-hard financial braniacs start looking more like sensible guys with a good common sense to the unschooled consumer who just got burned. Homeowners insurance needn’t be complicated. Knowing the basics can go a long way in protecting yourself from future liability.
Maintain your property
This seems pretty basic, but for strapped homeowners in a tight economy, it bears repeating. That poplar that came down on a neighbor’s yard? The homeowner on whose property the poplar grew was responsible for the damage. But guess what? His homeowners insurance policy did not cover the damage. It was well established that the tree had been leaning and basic maintenance dictated that it be taken down. Homeowners insurance will not pay for you to neglect your property.
Opt for replacement coverage rather than cash value coverage
Sure, it costs more, but, if you don’t, you run the risk of campfire cooking because the old stove that burned in the fire was fifteen years old and almost worthless.
Maintain a detailed inventory
The insurance company wants to make money. It does this by maintaining a fine line between customer service, to maintain market share, and minimizing claim loss. When you have a large claim such as a home fire, that insurance company may likely not want you back as a customer when you get back on your feet. The point? The insurance agent is a business person, and not your friend. The agent and company are protecting their business interests, and so should you. Make a detailed inventory of your possessions complete with pictures and purchase information. Keep records of home improvements. Then store this information away from your home, preferably in an area that won’t be hit by the same natural disaster.
What ignorance pays in restful nights during non-eventful times, it buys with anxiety and regret later on, after unnecessary damage and loss has happened.
