Two Purposes of Homeowners’ and Renters’ Insurance
Two primary purposes of homeowners’ and renters’ insurance are to protect you from liability claims and to protect you from actual property losses.
Liability, when discussing insurance, is the legal responsibility to pay someone else for damages as a result of your actions or inaction. If you do not repair your sidewalk and a pedestrian trips, breaking her hip, you may be liable for the cost of her medical treatment. A renter may have liability, also. For example, if a renter turns down the thermostat too far over a winter vacation, and the pipes freeze and burst, the renter may be liable to the landlord to pay for damages. Both homeowners and renters need insurance, if only to protect them against liability claims.
Property insurance is the portion of your policy that covers losses due to damage or theft. You may experience actual physical losses of property or the use of your property, due to disaster.
I want to be very clear: I am not talking about insurance coverage of any business equipment, business malpractice, or business loss-of-revenue due to interruption of business activity. Please talk to your insurance agent about these concerns, as they likely fall outside the personal insurance I am discussing.
Some losses are not covered under typical homeowners’ policies. Flood, earthquake, and mold damage are not, generally, and require specific insurance, separate from the homeowners (or renters) policy.
From the National Flood Insurance Program note that
In 1968, Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.
In addition, if you are eligible for flood insurance and wish to obtain it
It takes 30 days after purchase for a policy to take effect, so it’s important to buy insurance before the floodwaters start to rise.
Make sure you don’t wait until the water is rising. It’s just too late then. Similarly, this article last year from the Durango Herald noted homeowners can’t add insurance as the wildfires burn.
In addition, some household assets may need supplemental insurance for full coverage. For example, your valuable jewelry, musical instruments, computer or other electronic equipment, may need a rider or supplemental policy. Talk to your insurance agent to make sure you know what is covered under your policy, and whether you need additional coverage.
If You Need to Make a Claim
If disaster strikes and you need to make a claim due to property losses, you MUST know what is lost to submit a complete claim. That may not be easy for most of us, as we’d have trouble listing all the items in our home. For example, think of the cupboard closest to your stove. Can you list every item in the cupboard from memory? Can you list every item in your hall closet from memory? Probably not. Virtually every property insurance company recommends creating an inventory of assets, and many provide worksheets, spreadsheets, and other devices to do so. The task, though, would overwhelm many people, as even the least acquisitive of us typically own thousands of items. It would be ever more overwhelming while dealing with the distress of tragedy.
Instead, inventory the simple way. You’ll at least have a help in remembering what you own. Just use a camera, phone with camera, or video camera and make sure you take images of every room, all walls, and inside each drawer, cabinet, cupboard, and closet. If there are items of special value, such as antiques or high-end electronics, take close-ups of them. If you have receipts for valuable items, also create digital images of those. Though it’s still a time-consuming task, it gives you a huge boost in your ability to remember and claim all that was lost.
Then STORE those images away from your home. These days the easiest way to do that is to upload them to a photo service, or even email them to yourself.
If you lose use of your property and need to stay elsewhere for a period of time, keep all receipts for lodging to provide documentation for your claim. Also save receipts for repair, clean-up, and replacement costs. Your insurance agent will want copies of all of these to process your claims.
I hope none of us experience losses due to natural or man-made disasters. The probability is high, though, that many of us will. Please be prepared. INSURE. Know what your insurance covers. And be prepared to make a valid and complete claim by having an inventory of your stuff.
DO YOU HAVE AN INVENTORY OF YOUR STUFF?
Note that state insurance laws vary. Please discuss your concerns and coverage with your insurance agent to optimize the value you get from the policies you buy.