Why does my Homeowners Insurance policy have different deductibles for different types of claims?

Hurricane Irene hitting the East Coast was a reminder to the country that we are currently in the midst of storm season. With regard to hurricanes, the season in the Atlantic Ocean officially runs from June through November, with activity tending to peak around September. Hurricane Irene, arriving right on time, left a path of destruction from North Carolina all the way to New England.

Tragically, at least 27 people's deaths have been attributed to Irene-related storm events. Some three million people were left without power, and the financial impact of the hurricane damage is estimated to be upward of $7-10 billion. Only about $3 billion, or much less than half, is estimated to be covered by insurance, according to Kinetic Analysis Corp., a firm that estimates the economic impact of disasters. This data highlights the issue that many individuals and business are underinsured when it comes to disasters.

How to Protect Your Assets in the Event of Disaster

There are several steps you should take to ensure your assets are adequately protected. First and foremost, have an in-depth conversation with your insurance agent to make sure your insurance policy meets your needs should you have to make an insurance claim. During the conversation, you should ask several questions to ensure you are not underinsured. Examples of issues you may want to inquire about include:

What is my deductible for hurricane or storm damage?

Many people may be unaware that homeowner's insurance policies often have two separate deductibles. One of these deductibles is generally $500 or $1,000 and applies to claims like theft or fire. The other deductible is usually triggered by storms, wind and/or hurricanes, and is based on a percentage of the dwelling value covered by the policy. This can range from one percent all the way to 15 percent. Make sure you understand what types of events trigger a separate deductible, and that you are comfortable with whatever percentage you would be required to pay.

If my home or business is destroyed, what value am I insured for?

The default value you are insured for under many policies is referred to as "actual cash value" or ACV. This means that you are insured for your damages less the amount of any depreciation. Under many policies you can purchase an endorsement for "replacement cost value." This allows you to also recoup any depreciation costs. Consider and possibly research if you can rebuild for the limits listed on the declarations page of your policy.

Are other structures on your land covered by your policy, and if so, for how much?

This is called "other structures" or "appurtenant structures" coverage and technically refers to any buildings separated from your main building by clear space. For example: storage sheds, detached garages, barns, swimming pools, etc. Oftentimes, policies will only provide 10 percent of your limit for other structures. For instance, if your policy provided $100,000 to cover your home, you would have $10,000 to cover additional structures. Think about whether this provides enough coverage for the other buildings on your property, and discuss increasing the limit with your agent if it does not.

How are the contents of my home or business covered?

The contents of your home or business are also likely insured as part of your policy, but only up to a certain limit. Generally the amount of contents coverage your policy provides for is simply a percentage of the limit on your policy, commonly 70 percent. Thus, if your home is insured for 100,000, your contents would be covered up to 70,000.

As with structural coverage, consider basing the amount you need on what it will cost to replace things rather than their current value. It also may be wise to videotape a "tour" of all the contents of your home or business. Keep this, along with other important property documents, in a separate location.

Finally, you should make sure to thoroughly review your declarations page. The declarations page will include information such as the policy period, premium, deductibles, location of property and all coverages. Make sure all the information is correct, and ask questions of your insurance agent if anything is unclear.

By finding the answers to the questions listed above, you will have a better understanding of the coverage your insurance provides, and be better able to determine if you are underinsured and need to increase your coverage. You also should periodically review your policy to ensure it continues to meet your needs, even as your circumstances may change.

Courtesy: digitaljournal.com

Why does my Homeowners Insurance policy have different deductibles for different types of claims?

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