Review and update your homeowners insurance policy annually. Points to keep in mind:
- The insurance policy is a legal contract. Be familiar with coverages, exclusions, and limitations outlined in the policy. Coverages identify insured losses; exclusions remove coverage; limitations restrict coverage and loss settlements.
- Find out if you have replacement coverage on the dwelling and personal property. Replacement coverage means loss settlements are based on the cost of rebuilding or replacing damaged property. The alternative is actual cash value, where depreciation reduces the loss settlement.
- Note specific insured losses (fire, tornado, hail, theft, etc.) and those not covered (earthquake, flood, etc.). Discuss gaps with your local agent. Insurers offer a variety of buy-back endorsements to expand coverage.
- Homeowners insurance is based on dwelling replacement cost. Choose a dwelling policy limit based on the full cost of rebuilding your home using materials of similar kind and quality. Underinsuring your home may significantly reduce the claim settlement check.
- A room-by-room inventory will help you evaluate personal property insurance needs. When possible, inlude brand names, model information, serial numbers, and receipts. Video recordings, pictures, and appraisals are also useful. Keep the inventory in an offsite safe deposit box or fireproof container. Policies cover personal belongings for actual cash value (replacement cost minus depreciation), but most insurers offer contents replacement cost coverage for an added fee.
There may be very little time to react when a fire occurs. After the immediate danger is over and loved ones are accounted for, it's time to assess the property damage. Contact your homeowners insurance agent to report the loss as soon as possible. Here's what to expect next:
- The insurance company will assign a file number and adjuster to handle the claim. Place this and other pertinent information in an accessible file for your records.
- Make temporary repairs to protect the structure from further damage. Save receipts as homeowners insurance policies typically cover these expenses.
- Don't discard anything until the adjuster has examined the damage and approved.
- A serious fire may force you to move temporarily. Make the adjuster aware of your new address and keep receipts to verify additional living expenses.
- You will be asked for a proof of loss statement describing the incident and identifying damaged or destroyed items. Be as specific as possible. Your personal property inventory will be a big help in this process.
- The adjuster will prepare a written damage estimate. Keep a copy for your records.
- Save receipts as you begin to repair and replace damaged property. Ask the adjuster how often receipts should be submitted for reimbursement. Confirm the time limit to repair/replace damages.
- Talk to the adjuster and local agent as questions arise during the claim settlement process.