TUESDAY, FEBRUARY 14, 2012
No, the Tornado Alley universally recognized by meteorologists hasn't moved over Tennessee and Georgia. But try and tell that to the millions affected by the storms last year. Our own agency experienced the effects of three separate tornados last year. Amazing, considering it's never happened before in our 27 years in business!
It was, by all definitions for our area, a year of catastrophes. Communities and individuals were stressed to their limits by all the loss around them. Insurance was there for many that had it in place. But let's face it, with the sudden and widespread losses, the response efforts were tested and delayed.
Many found out during this time the importance of Replacement Cost versus Actual Cash Value policies and Loss of Use coverage.
Why Actual Cash Value-
There are reasons for homes to have an Actual Cash Value policy. It is always best to be at Replacement Cost. You have the best chance at having your loss restored to the full value and status it was before the loss. Usually, because of the difference inmarket, the premium for that Replacement Cost policy, and the Perils coverd, is better.
Sometimes, and especially in today's restrictive market, the agent is unable to qualify a home for Replacement Cost coverage. That doesn't mean the home can't ever have that coverage! It just means that some things may need to be improved in order to reach that market. It may be that your home still has fuses and needs to have the electrical panel replaced with Circuit Breakers. Perhaps the exterior needs to be updated with repairs to the siding or roof. Maybe debris and general pride of ownership is the problem. In any case, many of the problems can be corrected with little to no investment. Realistically, however, they can also be expensive, such as a new roof or updated heating system. In those cases, there may be local assistance available for low cost home improvement loans.
It's a good idea to have a conversation with your agent about the specific characteristics of your home that may be keeping you from the Replacement Cost market, and address those concerns specifically rather than just attacking your home with untargeted upgrades. Then, make sure to follow up with the agent and alert them that you have made updates and would like to have Replacement Cost coverage!
Make sure your coverage is correct for your home. Have you added additions? Have you replaced your shingle roof with a new metal roof? These things can affect your Replacement Cost estimate. Make sure you notify your insurance agent anytime you make changes to your home, so they can make sure you remain properly covered.
Loss of Use-
This coverage came in handy for several of those that were "twisted" out of their home and forced to live somewhere else, be it a hotel or apartment, while their home was repaired or rebuilt. But did they have a sufficient amount? This coverage limit is generally set by a percentage of the Dwelling coverage. The percentage can differ among carriers or even within the same carrier depending on your particular package that was purchased.
For instance, 20% is a common Loss of Use percentage. So on a home with $100,000 in coverage on the dwelling, the Loss of Use would be $20,000. This limit is there to help pay for costs of being displaced from your home. The exception to the percentage, is in some packaging where the Loss of Use is Unlimited or "Actual Loss Sustained". In those, there is generally a time limit implied by the policy, commonly 12 months.
Twenty percent may be enough for you. But understand that it is the minimum, not the maximum. So consider the cost of being displaced for an extended amount of time. Check the market you live in for cost of extended stay hotels or apartments that would sustain your family. Do you have enough? If not, request an increase to the coverage level you desire. Your agent can easily process that for you, and the additional cost is usually not even noticeable to your premium.
What should you do right now? Well, let me ask you a question first. Do you know what a Dec page or Declarations page is? If you don't, you've got your starting point for ALL things insurance.
The Declaration page is a declaration of your basic coverages on the policy. Usually contained to one or two pages, it will tell you your Effective and Expiration Dates; Your limits of coverage on the Dwelling, Contents, Other Structures, and Loss of Use; Also, your Liability and Medical coverages; And Finally, your Deductible. Some Declaration pages will plainly show if you have Replacement Cost coverage or Actual Cash Value, but not all.
If you don't have one, request one from your agent. They should be able to provide one almost instantly. You may be able to go online, depending on your carrier.
Then, at least once in the life of your policy, actually read your policy. If you can't bring yourself to read front to back. That's OK. At least read the section that will be titled something close to "Perils Insured Against", and/or "Exclusions". When looking at your Perils covered, be aware of specified limits on items such as jewelry, and building code costs. You see, an insurance policy will not always pay the costs of required building code updates on a home. And if they do, it may be limited.
Once you have reviewed your policy, you will be able to have a much better conversation with your agent. That's right- go talk to your agent! That's what you have one for! That agent should want to help you understand your coverages.
I like to borrow the saying made famous, "Help me help you." There is no way that any agent can anticipate your every specific needs. Maybe you have a fine gun collection, art collection, or several high priced pieces of jewelry; Or maybe you have a concern about Earthquake coverage.
The thing is all of those things I just mentioned have specific limits or, in the case of earthquake, are not covered by default at all. The good news is, you can increase those limits. You can add that earthquake coverage.
So, what's the first thing you need to do to prepare for this season of strong weather? Review your insurance policy with your agent!
Posted 12:41 PM View Comments
Tags: tornado, declaration, insurance, policy, agent, chattanooga, tennessee, georgia, loss of use, actual cash value, replacement cost