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March 02, 2006


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Im in the process of reviewing our renter's policy. One problem we have is whether to go with a large policy that covers the replacement cost value of every possession we own--down to stuff like the Brita filter in the fridge, but also to have a high deductible (e.g., $1000).


Whether it makes more sense to insure 60-70% of our possessions' replacement cost value, but have a lower deductible (e.g., $250).

We have ruled out both high coverage and low deductible because the cost becomes too significant.

This is a question of whether Im insuring for major/catastrophic risks like fire, or whether Im insuring for likely partial losses like theft. (Even if a burglar breaks in, he's not going to take my wife's $500 Prada shoes! But a fire doesnt discriminate.)

I cant figure out which risk makes more sense to insure for.

In terms of auto insurance, I did shop around and got a couple of quotes. The annual premiums varied by several hundred dollars.

When I called my agent to ask why my premium is higher, she told me that I should ask the other agents what happens if I have one or two accidents within a short period of time (e.g., 3 years). With State Farm, I have an accident free discount, and my first accident will be forgiven. With the second accident, my premiums would only go up 15%.

According to my agent, most of the other carriers would increase my premium immediately because I don't have a longstanding relationship with them. And with a second accident, some insurers will bump it up by 50%.

Statistically speaking, if I've been accident free for 10 years, I probably won't be getting into 2 accidents within a short period of time. But that's exactly what happened to my father 3 years ago. So, sometimes it's best to stay with the same carrier, even if it means paying $100 more per year.

Derek -- Only you know the answer for what best meets your needs. I wish you luck in sorting through the options and making the right decision for your family.

Derek, I'd consider two things - one is the total limit you want, the other is whether you want replacement cost valuation or actual cash valuation on your stuff. The limit only you can determine. Regarding, replacement cost value vs. actual cash value, replacement cost is almost always worth the added cost, even if you need to take a higher deductible to afford it.

By the way, another thing that people often overlook with homeowners' and renters' insurance is that coverage for jewelry is usually limited to $1500, and regular homeowners usually doesn't cover something like a stone just falling out of your wife's engagement ring and getting lost. If you've got expensive jewelry (particularly if it is being worn), buy a jewelry floater policy. It's not cheap, but it's worth it.

For those homeowners out there, I'd suggest asking your agent about one more thing - "guaranteed" replacement cost value for your home. That means if you have your home insured for $200k and it actually costs $300k to rebuild, the insurer still has to pay $300k. Without guaranteed replacement cost, you're limited to the $200k policy limit. This is a great coverage extension, because if you are involved in a widespread catastrophe, building supplies and labor costs usually go up considerably for the area.

Try checking this out maybe it might help.

I agree with your comments to a point, but to be perfectly honest with car insurance & household insurance, be it buildings & contents, stand alone or joint, it is something that every consumer should look at every year. lets face year on year companies offer deals, why stay with the devil you know, just because you know what they have on offer, all to often people miss out and find themselves signed up for another year only to find a policy a couple of weeks later post signing date that would have offered the same or even a better service for less, a good broker should flag a customers renewal date and try and find them the best deal, available as soon as it is apparent their first deal is coming to an end. the competition is hot out there, take advantage and save some money

I have losgt my engagement ring. i have an apprasial but I never added it onto my homeowner's insurance policy. Will it stillthe lose or am I SOL? Thank you for your help. Sonya

I have lost my engagement ring. I had it appraised but never had it added to my homeowner's policy. Will my homeowner's cover this lost or am I SOL? Thank you in advance--Sonya

Sonya -- I would guess that the policy will cover some of the value of the ring, but maybe not as much as its value (depending on its worth.) I'd suggest you contact your agent immediately and find out.

As a licensed, experienced, agent who is enough of a nerd to actually read every policy I can get my hands on, I feel compelled to point out a few things here:
1)Not all policies have the same terms and coverages - this is most distressing when you don't learn about it until claim time. When you start reading the 'fine print' as they say, policies can be slotted into a couple of categories: all-risk (or all-peril) and named-risk (named-peril). Basically, a named-peril policy makes a list of things they cover, and if what happened to your home didn't make the list, you don't have coverage. It's WAY easier for a company to deny a claim under these terms, thus these policies will generally be cheaper. An 'all-risk' policy instead lists the exclusions - meaning that most things of a 'sudden and accidental' nature will be covered, and the company will have to be able to point to one of the listed exclusions in order to deny your claim. (And I will grant that "*all*-risk" is a terrible name, because obviously there is no such thing, but I didn't make up the terminology here!)

Also - replacement cost is definitely worth the money, no ifs, ands, or buts. If you happen to end up among the lucky few who never file a claim ever, well then insurance in general will be a waste of money for you. But since you pay for it because you don't know when a disaster might strike, you might as well pay for something that will deliver when you need it. And when you actually have to file a claim, you WILL want replacement cost.

And the article makes reference to 'direct' insurers like far as I know, Geico does not offer Homeowners insurance at this time, although I have heard they are piloting a program in a couple of states. Most places, if you call Geico, you get a policy with a different company. Not sure how that is at all 'direct'.

Also, bear in mind that many 'multi-line' carriers offer hefty discounts for have auto and home insurance together. And as far as very frequent shopping - you could be losing out on huge longevity discounts over the long term. For instance, my homeowners insurance policy will be discounted as much as 25% once I have held it for 10 years with no claims. And the one claim I did have was related to a natural disaster (a tornado)- it is forgiven because it falls in the 'catastrophe' category.

Sorry for the lengthy post - putting my soapbox away now. :)

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