Hurricanes, fires, floods – all of these catastrophes can occur in the Houston, Texas area. You need to make sure that you are prepared…
Natural disasters are an inevitable part of life, and we need to be as ready as we can. Recent wildfires, droughts, and floods in the Midwest serve as reminders that these events can happen here in Houston, at any time.
Most people haven’t peeked at their homeowner’s insurance since the day they sat down to sign their closing documents. Although it isn’t fun to dwell on the possible misfortunes that can transpire with our homes, it is vital you ensure that your homeowner’s policy covers your family’s needs.
Take a few minutes to review the steps below to give your homeowner’s policy the “once over” and guarantee that you have the best coverage in case of an emergency.
Inventory Your Home
In a study cited by the National Association of Insurance Commissioners, 48% of homeowners surveyed stated they had not taken inventory of items in their home; of those who did, 32% had not taken photographs and 58% had no receipts. Having this information will not only make it easier to establish what you have lost in the case of a catastrophe, but it will also help you determine whether you currently have the correct level of homeowner’s insurance coverage.
How to create a home inventory
Click here for a home inventory checklist from the NAIC or iPhone users can download the free app here, where you can take photos of your possessions, write descriptions for each picture, and store the information online.
- The first items on your list should be the more expensive in your home; jewelry and fine art, family heirlooms or other collections, flat-screen televisions to musical instruments.
- Don’t forget to list items you keep stored away for most of the year, such as holiday decorations, sports equipment, tools, etc.
- Take detailed photographs or videotape of each item. Write a brief description of each item including purchase price, purchase date and estimated current value.
- Categorize your possessions for easy review. You can sort by room, by hobby, by season, etc.
- Organize all copies of original sales receipts and/or appraisal documents. Include model numbers and serial numbers. Scan these receipts into your computer for extra back-up.
- Store this inventory online, on a removable disc or hard drive, in a fire-proof safe, or even a safe deposit box at your bank. It is good to keep this information at a secure off-site location, just in case the worst happens.
Know your policy terms
Different policies contain different provisions with regard to losses. Some provide replacement cost, which is how much you would have to pay in order to replace items or rebuild your home based on current rates. Replacement cost coverage on your house does not mean the market value of your home, nor does it include the value of the land on which it stands. It is the cost supplies and work needed to repair your home.
Others provide actual cash value coverage, which is the cost to replace your home and possessions minus the depreciation of those items from the time they were purchased. These policies tend to cost less, however they also provide notably less coverage to the homeowner.
Know your policy terms and have the correct coverage
Most homeowner’s policies provide coverage in three areas of loss: structure, contents and additional living expenses. Typically, insurance companies pay their claims for each of these coverages separately.
After a dwelling loss such as a fire, the insured will likely receive an advance check for additional living expenses to defray the immediate cost of accommodations and as a show of good faith from the company. Beware that claimants with second homes, rental properties, and “kiddie condos” may be denied coverage for additional living expenses as the carrier may argue that acceptable accommodations were available at alternative sites.
Content coverage offers additional hazards for the claimant. Every item (down to the oldest dishcloth) must be inventoried. Most carriers then will pay the depreciated value for each which normally amounts to pennies on the dollar. Only after acceptable replacement items have been purchased and receipts rendered will the insured receive adequate compensation. This creates enormous cash flow issues and requires the utmost patience by the claimant to complete the arduous process.
Collecting for structure damage can also be tedious unless the homeowner hires their own advocates (engineers and consultants etc.) to contend with penurious adjusters who have only the company’s interest at heart. Even before the fire is doused, adjusters are on-site pressuring claimants to sign waivers – thus paving the way for “carrier-preferred” contractors to begin the reclamation and rebuilding process. Refusal to grant these concessions by the homeowner can start an endless series of contentious negotiations that will often end in expensive court battles to settle the structure claims.
Know how much your house and possessions are insured for. Review your policies annually to make sure that you are not over- or under-insured. The NAIC suggests you insure your home for at least 80% of its replacement value. This is where your home inventory can come in handy – use it as a gauge for your personal property coverage. If you want a third-party evaluation of your coverage, speak with your insurance agent or you can even hire an appraiser to evaluate your situation.
Disaster Coverage
According to State Farm, the four most common claims made by Texas homeowners are wind/hail, water, crime, and fire. For the most part, these claims are covered under your standard homeowners’ policy; however, it should be noted that flood insurance needs to be purchased separately (through FEMA’s National Flood Insurance Program (NFIP)).
Make certain that your insurance policy covers these damages. Some homes in the Houston area do not have the wind/hail coverage, for instance. Also, review the local flood chart to determine whether it is better to be safe than sorry from flooding during a particularly brutal hurricane or tropical storm.
Have a rainy, rainy, rainy day fund
As much as we understand our homeowner’s insurance to be our home’s financial parachute, we have to remember that no policy covers everything; whether fire damage is sustained, an infestation of termites is discovered, or a burst pipe wreaked havoc on your home, it is advantageous to have a separate fund specifically set aside as your personal parachute for home repairs.
It is important that you always discuss changes you want to make with your insurance provider. Explore your options, and make sure to review your coverage each year. Make it your policy to prevent a second disaster before the first one hits.
Average rates for the benchmark 30-year fixed mortgage as reported by Freddie Mac stood at 4.22% this week, unchanged from the previous week’s average. The average for the 15-year fixed amortization equaled 3.39%. This average decreased .05% on the week. Mortgage-backed security prices were largely unchanged through Wednesday of this week but rebounded on Thursday and Friday in response to very deflating jobs data reports. Today, Home Loan Specialists is posting par rates of 3.875% on 30-year fixed conventional and 3.75% on the 30-year fixed FHA loans. 15-year conventional rates are listed at 3.25%.
