Protect your home with good insurance

October 7, 2007

By KAREN PAUL

There is beauty in this life. We just need to take the time to see it.

Yesterday I took a drive to see an old friend. My journey took me off Route 2, driving on dirt roads only the locals know. Surrounded by crisp hues of crimson, burnt ochre and hints of yellow reminiscent of a summer sun at dusk, I found myself cradled by Vermont's most breathtakingly scenic time of year. Amidst the lifeless leaves that embraced me with lively color, I remembered why I live in Vermont. On an overcast dreary day, I sometimes forget.

Once I arrived at my friend's home, the beauty did not end. There was more. Now we have all gone to see friends and enjoyed their homes.

This visit was different.

Two years ago, I traveled to see my good friend and what I saw when I arrived could not have been accurately understood through photos or verbal explanation. Two days before, my friend had lost his home in a fire.

Walking through a field in rural Vermont, standing before the shell of a dwelling once held dear by its owners, I felt chills advance through my body as my heart tried to fully appreciate the weighty look on my friend's face. As we gingerly trod through burnt wood and the melted metal that had been the support beam over the cook's kitchen I had often admired, I began to develop an elementary understanding of what losing everything truly means.

Perhaps you have wondered what if? What if I have a fire in my home and everything is lost? How would I fare in the event of such a loss?

Whether you have ever pondered what you would do in a disaster, there is no time like the present to evaluate your insurance coverage. If you are a homeowner, protecting what is often your most valuable asset is paramount. There are different kinds of home insurance policies. There are four types that are most common. The most basic or HO-1 policy covers what are called 11 types of "perils." They are fire, windstorm or hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, damage by glass and volcanic eruption. (Ok, so the last one is a bit far-fetched unless you live near Mount St. Helens or in Hawaii.)

An HO-2 covers all the previous 11 perils as well as falling objects, weight of ice and snow, water damage and electrical surge damage. An HO-3 covers all that a HO-2 covers plus other perils not specified in your policy, except for flood, earthquake, war and nuclear accident. There is also a policy for older homes that covers repairs and actual cash values, not rebuilding costs. Most homes are covered by HO-2 and HO-3 policies.

When reviewing your policy, take particular note of these features:

Make sure your policy covers the replacement costs of your personal property and your home's structure and interior. Please keep in mind that market value is not usually anywhere near your replacement costs. Your personal property may decline in cash value but replacing your belongings could prove very costly.

Look for a policy with an inflation adjustment so the replacement cost keeps pace with the overall level of price advances. Never underestimate the value of inflation on the erosion of your dollar over time.

Of course, no insurance policy will cover 100 percent of your replacement loss. Unfortunately, such a policy would invite a great deal of fraud on the part of the unscrupulous. Most policies insure your possessions at 50 percent of the value of your dwelling. Thus, if you insure your home at $200,000, your possessions are insured at $100,000. Take a look around your home. Do you have antiques, gifts that are valuable, a larger than usual amount of clothes, tools or sporting equipment? It is possible to increase your content coverage to 75 percent with some limits on some property.

This weekend, while it is still fresh in your mind, take out your video camera or borrow one from a neighbor and go room-by-room and videotape the contents of your home. Talk through it about the highlights in each room, any items of particular value that may not appear to have such a value and give detail whenever possible. This should take maybe 30 minutes but it can really help.

Collect receipts of items of value and store all these records anywhere but your home.

Consider where you will live should your home be gone or unlivable. Be sure to have a "loss-of-use" provision in your policy. That coverage level can be as much as 40 percent of your home's insurance. In other words, your $200,000 would give you $80,000 in coverage which would include temporary housing. Depending on the extent of your loss, settling with the insurance company and rebuilding your home can take a year in some cases.

Over the past 18 months, I witnessed my friend's loss test the foundations and endurance of his being. Yesterday, my friend graciously and with pride showed me his new home, room by beautiful room. Fortunately, he had not only adequate insurance but receipts for many items in his original home. Having adequate insurance and doing your "home" work today can prove priceless in the event of an unfortunate tomorrow. Out of despair and doom, hope and beauty can happen.