Maximum Protection Insurance

The time to increase your homeowner's policy may come sooner than you think

Madelyn flannagan got the shock of her life in two installments. The first came when a friend visiting her at home began looking at two figurines from her $25,000 porcelain collection. “One minute he had them in his hands–the next they were in pieces on the floor,” recall Flannagan. No big deal, she thought. While the pieces were worth $5,000, having appreciated more than 200% since she bought them in 1974, Flannagan assumed her homeowner’s insurance would cover the loss.

Not so. Flannagan in for a second shock when she filed her claim. Her insurer would pay no more than $750. “Anything you think of as part of your everyday life, you really don’t consider insuring,” admits Flannagan, a consumer advocate for the Independent Insurance Agents of America. “I made a big mistake just assuming my coverage would take care of it.”

Sadly, Flannagan’s story is a typical one. True, she did have homeowner’s insurance. In fact, most lenders won’t issue you a mortgage unless you’re covered for the price of their investment, which just happens to be the value of your home. But after years of accumulating appliances, stereos. televisions and even a few luxury items like jewelry, furs, collectibles or objects d’art, you’ll find that whatever coverage you have quickly falls short of the replacement value of your prized possessions. “The thing is, people are usually tolerant of risk until they’ve had loss,” says Deborah Gaunt, an instructor of risk management insurance at Georgia State University in Atlanta.

Deciding whether you need additional insurance coverage doesn’t have to be a daunting process. Actually, according to the Insurance Information Institute, there are three triggers you should consider to determine if you’ll need to up your coverage: any, major home improvements (e.g., upgrading fixtures or appliances in a bathroom or kitchen), a lifestyle change (an adult child or parent with possessions moving into your, home) or major new purchases (dining room furniture, expensive appliances, jewelry or furs, for example). Here’s what you’ll need to know to shore up your coverage and save money while doing it.

ARE YOU AT RISK?
Essentially, the standard homeowner’s policy protects you if your house is damaged or destroyed. It also protects you from being sued should someone be injured on your property. At the same time, homeowner’s policies go one step further to cover what’s inside your home. Typically, personal belongings such as clothes, valuables and appliances are insured for 50%-70% of the amount of coverage you have for your home’s structure. So, if your home is covered for $100,000, then you can count on an additional $50,000-$70, 000 coverage for the items inside.

Where homeowner’s insurance gets complicated is in valuing what you own. Under your basic policy, you’re probably automatically covered for what’s called “standard dwelling replacement cost.” That means if by some catastrophe your home is destroyed, the most an insurance company is obliged to pay out is only “stated value”–the amount insurers determine your home is worth, factoring in the style, structure and location. Using

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