Money Management
FOR
IMMEDIATE RELEASE: September 24, 2007
IS YOUR
HOME ADEQUATELY INSURED?
For most people, a home and its contents are their most
valuable assets. To protect them, it’s important to be sure
you have sufficient homeowner’s insurance. If it’s been a
while since you’ve assessed your insurance needs, it may be
time to reexamine your coverage. That’s particularly true if
real estate values have risen in your area or if you’ve made
major home improvements, according to the North Carolina
Association of CPAs.
REVIEW
YOUR POLICY
Unfortunately, when a disaster occurs, homeowners often find
that their insurance coverage isn’t adequate to cover all
their costs. To ensure that doesn’t happen, review your
policy when it comes up for renewal, after a major addition
or renovation, or when you’ve installed a new burglar or
fire alarm system. You should also do so after a life
change, such as marriage or divorce, when the contents of
your home may change.
PICKING
THE POLICY
CPAs recommend that you consider what kind of repayment you
want to receive for damages. A cost-value policy will
reimburse you for the price you paid for an item. However,
the insurance company will depreciate that price based on
the age and condition of the item, which means you’ll likely
receive less than you need to buy a new replacement.
Replacement cost coverage is more expensive than a
cost-value policy, but it will provide you with the amount
you need for repairs or replacement. A guaranteed or
extended replacement cost policy pays whatever is
necessary to rebuild a home as it was before a disaster,
even if that amount is more than the policy limit. Insurance
companies may place limitations on any policy, so find out
precisely what your policy promises. Remember, too, that if
you live in a flood zone or in an area subject to frequent
hurricanes, it may cost more to cover these catastrophes.
CREATE AN
INVENTORY
If disaster strikes, it’s helpful to have both written and
photographic inventories of the contents of your home that
you can use to back up your insurance claims. They should
include all home contents—furniture, electronics, artwork
and collectibles—along with estimated replacement values.
Ask the insurance company if you need a separate rider for
valuables such as jewelry, art, antiques and computers.
Be sure, too, that the company is aware of new additions or
renovations to your home, which may expand the square
footage that must be covered or raise the value of the
property. In your policy review, make sure that it reflects
overall changes in real estate values in your area. The same
is true of any possessions whose value may have increased
since they were first insured. You may need to call in an
appraiser to determine the current worth for your home or
its contents in order to change your policy.
To speed
the process after a disaster, make sure your policy,
insurance company contact information and the written and
photographic inventory of the contents of your home are
readily available. It’s best to keep them in a secure spot
away from your home, such as a safe deposit box or with a
relative who lives nearby.
SHOP
WISELY
Don’t hesitate to shop around for the best rates. While
adequate insurance is important, you may be able to find a
better deal for the same amount of coverage. However, check
that the insurer you’re considering has been given good
ratings by ratings agencies such as A.M. Best or Standard &
Poor’s or by a consumer watchdog such as Consumer Reports.
Choosing
the best policy and ensuring you have the proper coverage
can be complicated. Your CPA can advise you on many personal
finance decisions, including getting the right coverage for
your home.
Produced in cooperation with the AICPA.
©2007 The American Institute of Certified Public Accountants
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