Questions for Your Homeowners Insurance Agent

A client recently encountered an issue when trying to get homeowners insurance for her soon-to-be home. The insurance company she was trying to use had changed some of their policies while we were in our under-contract period. When we needed to change the policy start deadline, they were unyielding and inflexible in making any changes to her policy. This is quite unusual. Steve Hakes with Rocky Mountain Insurance Center, our local insurance broker, was helping her and we had a chance to discuss the current atmosphere in the insurance market.

He said insurance premiums have increased significantly over the last few years. Due to more substantial and more frequent storms and natural events, some companies are limiting the number of new policies they write or are ceasing to write new policies at all in some states.

To get the best deal on their monthly or annual premiums, consumers are signing onto policies with inadequate coverage and high deductibles. Sometimes, they don't understand what they are signing up for and actually cannot afford to pay the deductible in the event of a loss.

Steve recommends checking in with your insurance agent every few years to ensure your coverage is appropriate. We discussed his specific questions and recommendations regarding this conversation. Read below to learn more about what you should ask your trusted insurance advisor about.

What should people check on about their homeowners' policy? And what else should homeowners and renters be aware of with regard to their coverage?

1. Dwelling Coverage:

Steve says that homeowners should first and foremost check their Dwelling Coverage, even if they have a relatively new policy. Construction costs have increased significantly each year, so checking on this yearly is a good idea.

Get a written, current reconstruction cost estimator from your agent. Go through this carefully and ensure the estimator is accurate regarding how your home is built. The estimator makes assumptions about building materials and style, and it could underestimate your rebuild cost.

Questions for your agent:

What is my current dwelling coverage? Do you think this is enough? Can you provide me with a current, written reconstruction cost estimator that I can review?

2. Extended Dwelling Coverage:

This is a rider that should already be on all homeowners insurance policies, and it is a percentage of the Dwelling Coverage. Extended Dwelling coverage is additional coverage that accompanies your Dwelling Coverage. Some companies offer 25% Extended Dwelling Coverage and others go up to 50 or 100% of the Dwelling Coverage. As a consumer, you likely want this coverage to be higher. Look for 50-100% of Extended Dwelling Coverage. If the company you are with only offers 25%, consider switching companies to get better Extended Dwelling Coverage.

Questions for your agent:

What is my current Extended Dwelling Coverage? If it is 25%, can this be increased? What is the total amount of coverage I have if my home is destroyed?

3. Guaranteed Dwelling Replacement

Some insurance companies offer Guaranteed Dwelling Replacement. This means they guarantee the rebuilding of your home and cover the entire cost of the reconstruction in case of a total loss.

Question for your agent:

Does my current insurance company offer Guaranteed Dwelling Replacement?

4. Loss of Use Coverage

Loss of Use Coverage covers your expenses if you can't return to your home due to a natural disaster. It covers things like living expenses and rent if you were displaced. Many policies only cover 12 months of expenses. If this is the case with your policy, you should consider upping coverage to 24 months.

Questions for your agent:

How much is my current Loss of Use coverage? Do I have 24 months of expenses covered if I can't go home?

5. Personal Property Coverage

Steve recommends that people also review their Personal Property Coverage and make an inventory of high-value items. Steve says the best way to do this is to take a video of the contents of your garage and home. Include each room, pan right and left, include the furniture, floor, and higher up on the walls as well, to show things like window coverings and artwork—open cabinets and drawers.

In case of a loss, this video can help spur your memory so that listing all items of value that were lost is easier. Upload this video to the cloud, save it to DVD, and share it with a friend or family member.

Questions for your agent:

How much is my Personal Property Coverage? Should I increase that?

6. Ordinance or Law Coverage

According to Steve, if you own a newer home, your current Ordinance or Law Coverage is probably sufficient. If your home is 20 years old or more, consider upping your Ordinance or Law Coverage. This additional coverage is earmarked to bring your older home up to code in the case of a rebuild. Older homes may have older electrical systems, plumbing, and more, and in the case of a rebuild, these would have to be brought up to current code.

Questions for your agent:

What is my current Ordinance or Law Coverage? Should I increase that?

7. Fireproof safe

Steve's last recommendation is to purchase a higher quality fireproof safe that can withstand very high temperatures for an hour or more. File life insurance documents, titles and deeds for homes and cars, social security cards, and other important documents there. Make copies of documents and save them to the cloud or share them with family or a friend.

As always, don't hesitate to reach out with questions. If you'd like to contact Steve to discuss your insurance policy and coverage, you can reach him here.

Until next time!

Allison and Ken