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Adrian Mastracci, president of KCM Wealth Management, says “You don’t want to be underinsured on property coverages. Whether you own or rent. It may cost much more than some policy premiums." |
Vancouver, BC (August 30, 2006): It’s been a year since the hurricane Katrina devastation was vividly displayed every day. Property insurance coverages have been changing fast and furious since.
Adrian Mastracci, investment counsel at Vancouver's “fee-only” KCM Wealth Management, comments, “Few people analyze their property insurance policies in detail. But not for much longer. For properties located both in the US and Canada.”
Replays of Katrina events prompted me to revisit my previous property insurance newsletter. Start with the sample report and FAQ’s found at this link: www.accucoverage.com. It’s the new reality.
More insurance companies now require such an estimate of costs to replace your property should it burn to the ground. Some coverages are becoming harder to get and more expensive.
Insurance agents are now using software, called “RCT Evaluator”, geared to reconstruction costs for your area. Insurance companies will likely not accept an application without these estimates.
You don’t want to be underinsured on property coverages. Whether you own or rent. It may cost much more than some policy premiums.
Be proactive. Embark on a little property risk management. Here are four essentials to examine:
- Costs to fully rebuild your structure and replace all contents.
- Third party liability suitable for your needs.
- Exclusions contained in your policy.
- Expenses incurred by you and your family to live elsewhere during a reconstruction.
Buildings and contents
The most difficult exercise is to determine the “replacement costs” for buildings and contents. They vary widely all across the country. Insurance companies are adopting an appraisal like format to collect data about your property.
This more accurately estimates replacement costs. Insurers may even request to inspect your property before issuing coverage. Templates are available to deal with replacement costs of contents.
Anyone who has renovated, or owns a heritage home, ought to review and update the valuations. Similarly, the value of a custom built home with top-of-the line materials is different then a standard quality home.
Specialty items, such as jewellery, works of art, coins, stamps, collectibles or vintage automobiles, may require appraisals. These are covered by riders added to the policy.
Condominium owners should ensure that the strata corporation has a handle on the replacement cost of the entire building. Your portion of a payout should approximate realistic values. Business owners ought to review values for the business premises, inventories, all equipment and other materials.
Limits and deductibles
Look upon liability insurance as a safety net that protects your financial assets. Start with the third-party liability for each property, vehicle and business location.
A minimum of 1 million is just a start. Although, coverage in the 2 to 5 million range may be more appropriate. Say, for a swimming pool, business vehicle, boat or airplane.
The maximum third-party liability on most policies is typically 2 million. An umbrella policy can increase your limits. For example, you may reduce third-party liability coverage to 1 million on properties and vehicles. You then purchase a 4 million umbrella policy coverage for a total of 5 million.
Coverage for business interruption and rental interruption insurance may be appropriate. Particularly, for those who have financed the premises.
Policy costs are becoming bigger factors. Premiums may reduce by discounts for security systems, dead bolt locks, smoke alarms, and placing all your business with the same company. Perhaps, consider higher deductibles. Seniors may also get a break on premiums.
Exclusions and expenses
Make sure you understand the exclusions in your policy. Investigate whether damage from broken pipes or sewer backup is covered. Another is conducting business matters in your home.
Most companies require a rider for earthquake and flood coverage. Your location and probability of occurrence will determine the premium and availability.
One area not to be overlooked is the reimbursement of expenses incurred while a property cannot be occupied. Estimate the expenses you are likely to incur if your home had to be completely rebuilt. Keep receipts and document all extra costs for the claims adjusters.
Bottom line
Make an effort to understand your property risks. Not to mention the language in your policy.
Review your property insurance coverage annually. Ask yourself where you are most vulnerable, what you can do about it, and what costs you may incur.
Having a good long chat with one or more property insurance agents is time well spent. You want the most comprehensive policies you can afford. It’s a mugs game to skimp on property coverages.
Protecting your nestegg from a financial disaster deserves your full attention.
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