Tuesday, 8 July 2014

Tips to know what home insurance covers and what it doesn't

If a tree falls in your yard, your insurance agent might not hear it.

You probably bought your home policy years ago, then stuffed it in a file somewhere. Will it be there for you when you need it?

Here's how to protect yourself:

1. You'll probably have to fight to get a big claim paid. Homeowners who suffer a loss of $30,000 or more get the most pushback from their insurers over damages, coverage and slow payouts, ShopSmart's recent survey data shows. But the coverage of huge losses is exactly why you buy home insurance.

Protect yourself. You can cut your odds of a fight by doing business with an insurer that pays its claims. The best carriers for claim-payment satisfaction are Amica, Auto-Owners and USAA, according to the most recent Consumer Reports National Research Center survey of 9,905 subscribers who filed homeowner claims from 2010 through the first six months of 2013.

2. The first offer may not be your best offer. Consider your insurance adjuster's first offer just an opening gambit.

Protect yourself. If you have a dispute over damages, make the adjuster go over the estimate, line by line, with you and your contractor. Get a second opinion from an independent contractor or multiple estimates, if necessary.

3. Your trees can bankrupt you. Linda Paustian of La Porte discovered that after a violent thunderstorm dropped about 40 hard maple and red oak trees on her home and property in June 2010. State Farm paid $6,000 to remove the trees that struck Paustian's 1895 Arts and Crafts bungalow, but nothing of an additional $6,000 that was needed for tree and debris removal and stump grinding.

Protect yourself. Understand that a standard policy covers trees that fall on insured structures but generally not those that land in your yard.

4. Your bank might hold up your check. “Every check sent to us had to be forwarded to the mortgage company so they, in turn, could write another check to us so we could pay the contractor,” says Thomas Sloan, who suffered $33,000 in damages when the remnants of Superstorm Sandy blew a neighbor's oak tree onto his West Virginia home in October 2012.

Protect yourself. If you have a mortgage, expect a settlement check made out to you and your mortgage company. Find out how to get it promptly endorsed and deposited to your or the lender's escrow account.

5. You may end up with a lot of damage from a little water. James Peter told ShopSmart that his California home had $48,000 of damage thanks to a leaking valve in his refrigerator icemaker that wasn't discovered for months.

Protect yourself. Check for leaks in bathrooms, kitchens and basements, and on the roof. Periodically inspect behind appliances. Get add-on insurance coverage for sewer backups and flood insurance for water threats from outdoors.

6. You may need lots of cash to pay for repairs. Settlements aren't always paid quickly or in full, so you'll need cash flow.

Protect yourself. Keep credit card balances low or pay them off in full each month so you have ready credit after a big loss. Build an emergency savings fund.

7. Your trusty insurer may dump you. State Farm lived up to all of its promises to James Lipsett and his husband, Paul LaRiviere, on their $35,000 water damage claim on their Morro Bay, Calif., home. But less than a year later, the “good neighbor” people sent a notice of nonrenewal because of the claim. State Farm declined to comment.

8. Your most valuable valuables may not be covered. If that diamond ring goes missing, you're out of luck with a standard home insurance policy. Same goes for expensive furs, silverware or artwork.

Protect yourself. You'll have to pay extra for a special endorsement or floater to cover the full value of pricey possessions.

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