Spring 2018 Newsletter
Trying to make sense of all the terms and jargon on your home insurance policy can be confusing, and when it comes to insurance, small differences in the contract language can make a big difference to your bottom line after a claim. While I'm always happy to assist with your questions, I've defined some important terms to look for below.
Deductible and Wind/Hail Deductible
A deductible is simply the amount you self-insure. If you have a $10,000 loss that's fully reimbursable and a $1,000 deductible, you'd receive a payment of $9,000 (10,000 - 1,000). Deductibles are a standard element of most insurance policies but sometimes policies can have a more complicated deductible.
Your policy could have a percentage deductible, like a 1% deductible. This means that your deductible amount varies with the value of your home. If your home is insured for $250,000 and you have a 1% deductible, your effective deductible is $2,500 (250,000 x 1%). If your home value is automatically increased for inflation, your deductible also increases.
It's also possible that you have a separate deductible for wind and/or hail losses. You could have a deductible of $1,000 on your policy with a wind/hail deductible of $5,000. This means that the $1,000 deductible would apply to a home fire or theft loss but a $5,000 deductible would apply to a loss resulting from a tornado or hail storm. Since wind and hail damages are some of the most common causes of loss to homes in our region, it's important to understand what kind of coverage you have in place so you don't get surprised after a claim.
There are different ways to value property after a loss. Your insurance policy will define how your property gets valued and depending on the method used, it can mean thousands of dollars difference.
Replacement cost will pay you an amount equal to that required to replace your property less any deductible. Actual cash value pays you the value of your property less depreciation and deductible. This means you may only receive a portion of what it costs to replace items.
Take your roof as an example. Assume for illustrative purposes that there is no deductible. If your roof is destroyed by hail and it costs $12,000 to replace, replacement cost valuation should pay you $12,000. Actual cash value will likely start at $12,000 and go down from there. Say your roof is depreciated by 30%. You'll actually receive a payment of $8,400 (12,000 x 70%).
Scheduled Personal Property
Certain classes of high risk property have sub-limits of coverage on home insurance policies by default. If you own jewelry, guns, furs, art, or several other high value classes of property, you should check your policy to see if they're scheduled. If not, you may be under-protected. The most common use of scheduled personal property is for jewelry, like engagement and wedding rings. If you have a ring worth thousands and you don't see it listed on your policy, give me a call.
Insurance contract language can be hard to decipher. If you have any questions or would like a free review of your policies, simply contact me.
Disclaimer: The above are merely suggestions and tips, and are not meant to guarantee individual results. Any changes to insurance should be discussed with a licensed professional.
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