Here's the next post in our short series on insurance. This time Suze Orman shares her thoughts on home insurance:
If you haven't upgraded your home insurance policy in the past few years you could be dangerously underinsured. That's because you need to be certain that your policy is keeping up with the rising cost of replacing your home.
What you need to insure is not the current value of your home, but the cost to rebuild if it were destroyed. And given the sharp rise in building costs, you could be looking at a wide difference between the two. So you need to work with your insurer to make sure you have adequate replacement cost coverage tied to rebuilding costs. Also, look for a policy that has an automatic inflation adjustment, so your coverage will increase each year to reflect rising home and homebuilding costs.
Renters also need coverage. (See here for FMF article on renter's insurance.) Not for the actual property, but for everything you want to protect inside the home. With a renter's policy, make sure again to get actual replacement cost coverage. Do not settle for a policy that will pay you just the depreciated value of a possession.
For both homeowners and renters insurance, you should also ask the insurer to include an umbrella liability policy with your coverage. For about $200 a year, you get $1 million in liability protection. That’s nice to have if you are ever sued over an accident on the property you own or rent, and the coverage applies to auto accident claims too.
Good advice, especially about the umbrella policy. In today's legal environment, someone can stub their toe on your property and walk away with a million dollars. That's why I have one in place. Talk to your agent about one. As Suze said, it doesn't cost that much per year, but it gives you a great deal of protection.
Comments