“The wealth of the rich is their fortified city, but poverty is the ruin of the poor.” (Proverbs 10:15)
Imagine, if you will, these nightmare situations regarding your home:
1 An A/C repairman falls through the ceiling, breaks his back, and sues you.
2 Your dog gets out, and for some reason feels threatened and attacks a neighbor, putting him in the hospital. He sues you.
3 A single friend has a drink at your house and then falls asleep at the wheel on the way home, killing himself. His mom sues you.
These are just a few, random examples.
The craziest story I’ve ever heard was that of a painter high on cocaine working on someone’s house in the northeast, falling off his ladder, suing the homeowner, and winning a large settlement. It’s hard for me to believe it’s a true story, but the point is that very strange and unimaginable things can and do happen, and there’s a small chance that they could happen to you. What if they did?
There are two main components to most homeowner’s insurance policies. The liability coverage on the policy is one of the numbers that you commonly see. In Texas, where I live, standard coverage is $300,000 (although this is not always the case and shouldn’t be assumed). If, in any of the above cases, you were sued for $2,000,000 (the HLV of the person suing), the insurance company would cover the first $300,000 and you would be on the hook for $1,700,000. Could you pay that? If you can, how big of an impact would this have on you financially? If not, imagine the years it would take to work off that burden.
The other coverage numbers on your policy are for the replacement of your home and property if they are damaged or destroyed. When it comes to your home, you should make sure that you have Replacement Coverage – so that if the cost of materials or labor shoots up between the time that you are issued the policy and the time that you collect (because your house burned down or some such thing), the company will pay the cost to replace your property. Otherwise, you could end up having to build a smaller home.
The same is also true of the furniture and personal items in your home. Do you know what they’re worth? Do you have an inventory of what you own? Receipts? Proof?
We recommend that you go through your home with a video camera and describe in detail anything you believe might be of more value than is readily apparent. This will come in handy when you are trying to establish a value for all the things you owned that are now lost when speaking to the adjuster.
Obviously, we’ve just introduced a substantial point of concern. Tomorrow we’ll cover the easy solution that can save you money each year while drastically increasing your protection.
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Photo credit: orvaratli