Best Advice for Homeowner’s Insurance – Important Questions for Your Insurance Agent

By: Kareen Kinzli Larsen | Associate Broker RE/MAX Alliance

Increasing insurance rates are on every homeowner’s mind. You may be looking to switch or adjust your coverage to make it more affordable. Before you make changes or, if you have not taken time to consider your current insurance, ask your insurance agent the following questions to make sure you have accurate coverage. 

Is this an Replacement Cost Policy or a Actual Cash Value?

Understanding this difference is of critical importance. Insurance is supposed to be there to cover the cost of repairing damage after a catastrophic event, but only if you have the right policy.  If you have a Replacement Cost policy, your insurance will pay to repair or replace the damaged property at today’s prices up to the amount covered by your policy. However, an Actual Cash Value policy, will only provide funds after depreciation is taken into consideration. For example, if you have a 30-year roof that is 15 years old (half of its useful life) and your roof is damaged in a hailstorm, your insurance company will only provide half of the cost to replace your roof. Ask your insurance agent to explain to you what would happen in the case of a claim. 

What is my deductible? What is the cost of my policy with different deductible amounts?

Deductibles have changed quite a bit in recent years and in many cases, they are no longer a fixed dollar amount but 1% or 2% of the value of your property. Know the amount of your deductible and if it will change over time. 

Is the amount I am insured for replacement cost an accurate amount?

Building costs have increased exponentially in the past decade. If you have owned your home and your policy is more than 2-3 years old, you may need to look at your replacement cost amount. Insurance companies have data on current replacement costs and can help you update the coverage you need. There are also supplemental policies that will provide extra funds to bring the covered items up to current codes. For example, if building code requirements have changed for a replaced item, the insurance company will pay to bring it up to current code.

Are there any property improvements that will save me money on insurance premiums?

Have a detailed discussion with your agent about your home’s features. If you have a Class 4 hail resistant roof or a security system, you could receive discounts on your premiums.

What supplemental policies should I consider?

Depending on your needs, there may be additional supplemental policies that you should consider. Insurance companies now provide outstanding coverage for HVAC systems (furnace and air conditioning unit) and sewer lines. If you are in a townhome or condo, it is very important to have special assessment coverage to cover any special assessments issued by the homeowner’s association. Each policy has limitations, so it is important to discuss all the options. 

Walk me step by step through the claims process for your company.

The claims process varies from insurance company to insurance company. It is important to understand the process in advance. If you have a loan against your property, the insurance company will make any insurance claims checks out to both you and the mortgagee. It is also important to understand how much money you will receive upfront in the event of a claim. Some policies will pay you for the entire amount of the claim upfront and others will only pay you the depreciated amount of the loss and there is a process to go through to receive the remaining funds for repairs.