Many of our neighbors are still picking up the pieces after the fires last fall destroyed more than 7,000 homes across the North Bay.
In addition to the tragic loss, many found out that they were underinsured, and didn’t know it.
According to Consumer Reports, 60 percent of all U.S. homes are underinsured, and data shows that two-thirds of all homes damaged by the recent fires were underinsured by more than $50,000.
Let’s look at three common gaps in coverage that contributed to this tragedy after the tragedy.
Gap No. 1:
Not enough coverage on your dwelling.
Your home is insured based upon the cost to rebuild it, not its current market value. That’s a surprise to many people. But it’s true. So, thinking about “how much is my home worth?” is not the proper way to determine the amount of coverage you should have.
You should always base your insurance coverage on how much it will cost to rebuild your home.
And that can get confusing.
How much does it cost to build a new home in your area today?
That’s based on type of construction and market demand. For instance, if lots of people need to build all at once (say, after a big fire), then costs can go up.
You need a proper homeowners insurance review every year to make sure your home could be fully rebuilt after a fire or other catastrophic loss. Guesswork is the primary reason for this gap.
Gap no. 2:
Not enough coverage for your possessions.
People seldom think about how much coverage they have for all their possessions. It’s normal to assume they have enough. But people often have gaps in this area, especially if they own expensive items.
If you have expensive electronics, artwork, firearms, collectibles, jewelry, antiques, or musical instruments… you probably need to talk to your insurance agent to make sure that they are fully covered.
In addition, even if they are covered without a specific policy limit, the combined value of them may exceed your coverage limits.
Gap no. 3:
Not enough coverage to meet new building codes.
Here’s a hidden gap that’s seldom talked about.
Many homes were built years ago. They are beautiful, and all “up to code.”
Except they aren’t. Not by today’s codes anyway.
If many of those homes were built (or rebuilt) today, state and local ordinances would require that they meet current building codes. The codes back then don’t apply when rebuilding today.
Many homeowners get hurt by this at claim time. They don’t have proper coverage for building code upgrades. That coverage is often known as Ordinance & Law Coverage.
Only a local insurance professional who is familiar with local codes can make sure you’ve got enough coverage for this.
It’s critical that you have an annual homeowner insurance review with a local insurance professional. You need someone who is committed to making sure there is not an insurance tragedy after a tragedy.
You’ve seen it everywhere: “click or call to save on your insurance.”
Should you click or call?
How do you compare car insurance rates without going bananas?
1. Jungle of carriers.
According to the Insurance Information Institute, there are more than 2,500 auto insurance companies in the United States.
Hundreds of these companies are licensed to sell you a policy in California. How can you possibly compare them all? There is always “one more quote” that you can get. Who’s got the time?
2. Apples and oranges.
Anyone can quote you a cheap price and “compare” that to your current policy.
They can even say that it’s an “apples to apples” comparison.
But what if it’s “apples to oranges?” There are so many ways that a car insurance quote can be “tweaked” to make it look better than what you have now.
At the end of the day, you must trust someone to know that it’s truly “apples to apples.”
3. Fine print nightmare.
We all know the adage: watch out for the fine print.
So where is the fine print in a car insurance quote in Napa, California? Usually (not always) it’s in the “exclusions” part of your policy. That’s where the “gotchas” often live.
You need someone you can trust to explain the “insurance-y” language.
1. Company stability.
Big doesn’t always mean better or safer. We learned just a decade ago that no one is too big to fail.
So, if bigness alone doesn’t guarantee stability, how can you determine by yourself if a company is stable?
When you choose an insurance company, you are betting on them to pay claims later.
2. Inadequate protection.
Here’s the biggest risk you face when comparing car insurance premiums. You may be tempted to lower your coverage to get a cheaper rate.
That’s not always a bad idea if you are aware of the risk. For instance, raising your deductibles may be a good idea for some people. That can help lower rates.
But many people I talk to don’t have enough liability protection. They haven’t looked at their assets and future earnings potential to see if they have enough protection in case of an at-fault accident.
In addition, some coverage just makes great sense but is not required, such as uninsured motorist coverage.
Numbers can be tweaked to create a great quote, but the quote may expose you to great risk.
Trust is the solution.
You must trust someone. You’ll either trust yourself, an online computer program, a person in a cubicle hundreds of miles away, or a local and experienced agent. Your assets and future earnings are at stake, so your choice matters. Choose wisely.
Call a local agent who lives in your community.
They have “skin in the game” at claim time. Your safety, and their reputation hang on helping you make the best choice.
They will put your interests first.