Disaster insurance coverage

If disaster strikes your home, you will need your insurance coverage to make things whole again. Whether your homeowner insurance comes through for you, however, depends on how you arranged your coverage. Below are 6 tips to help you evaluate your coverage.

1. Know your coverage

To be prepared, the first thing you should know is what your policy covers. Standard homeowner policies may exclude covering losses due to landslides, earthquakes, power failures, war, government action, faulty zoning, inadequate maintenance, poor workmanship and certain types of water damage. Special policies are available to cover some of these risks. Wind and water damage may be covered in most regions but areas prone to hurricanes, tornadoes, floods or earthquakes may require extra coverage or require higher deductibles.

Homeowner, renter and condo-owner policies cover a home’s contents as well as liability for injury to people on the property. Standard policies typically cover contents up to half the value of the structure, but higher limits are usually available. Some classes of contents may have special limits, such as jewelry, which is often limited to $1,000 unless higher limits are purchased.

2. Consider replacement costs for your contents

Some policies reimburse the policyholder for replacement costs, while others reimburse for the market value of the damaged or destroyed home or items. For example, Nationwide’s Brand New Belongings® coverage is an optional feature for homeowner, condominium and renter insurance policies that provides the funds to repair or replace items when they are damaged, destroyed or stolen, regardless of their age or condition. For example, if your 10-year-old TV is damaged in a fire, Brand New Belongings will replace that TV with a new model.

3. Avoid common rebuilding-cost mistakes

When deciding how much insurance or what type of policy to buy, homeowners often make one or more of the following mistakes that affect how much they pay in premiums and how much of their rebuilding costs will be covered:

  • Incorporating the cost of land into the home’s value: Land typically isn’t destroyed, therefore, “calculate the money needed to rebuild your home on a lot you own, rather than basing the rebuilding cost on the market value of the home,” advises Michael Thrasher, research analyst for consumer financial advocate ValuePenguin.
  • Not updating your home’s value after remodeling: When calculating rebuilding costs before a disaster, it’s a good idea to hire a contractor to estimate the cost of replacing the structure under current building codes. Local building associations, home appraisers and your insurance agent can also provide estimates. As a rule of thumb, multiply the square footage of your home by the building costs for that type of home in your area. “Owners may spend a lot of money remodeling, adding new materials, furnishings and appliances, but fail to reflect those improvements in their insurance policies,” says John Bodrozic, co-founder of HomeZada. Be sure your policy includes Ordinance or Law coverage to cover the added expense of repairing or replacing your home to all current and future building codes.

4. Create a home inventory

“Make a home inventory that itemizes all belongings before a disaster, and review it with your insurance company to make sure you are properly insured,” Bodrozic advises. “Update this inventory to include completed home-remodeling projects.”

You may need to increase the value of the policy to cover the added cost of replacing these materials, or to add supplemental insurance to cover losses for certain possessions, such as jewelry or antiques.

“After a disaster, your home inventory helps prove you incurred a loss,” Bodrozic says. He suggests storing a digital copy of your home inventory and other important information away from your home to protect it from a disaster that may destroy your home.

5. Have enough liability coverage

“Liability coverage protects the policyholder and family members (including pets) from lawsuits for bodily injury or property damage. It covers court costs and awards, if ordered, up to the limit of the policy,” Thrasher explains.

Liability coverage may not seem an issue when considering disasters, but it can play a role. Consider, for example, a visitor who is hurt from slipping on your icy sidewalk during a winter storm, or who is injured by falling tree limbs or breaking glass during heavy winds.

Policies often limit liability to a maximum of $300,000. Make sure you have enough liability coverage to protect all your assets in case you are sued.

6. Evaluate your policy whenever things change

To ensure you have adequate coverage, “Reevaluate your insurance policy as circumstances change, not just when the policy is renewed,” Thrasher advises.

Taking these simple steps now will go a long way toward helping you gain maximum value if you must file a claim.

Insurance terms, definitions and explanations are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in individual insurance contracts, policies or declaration pages, which are controlling. Such terms and availability may vary by state and exclusions may apply.