Spending more time at home has motivated many not only to create or upgrade home office and study spaces, but also to tackle home improvement projects of all magnitudes.
As if battling a global pandemic hasn’t been enough to contend with over the past year, an uptick in weather- and fire-related natural disasters has many policyholders concerned about preserving the value of their homes and other assets.
And yet many policyholders fail to regularly upgrade their home insurance coverage limits, despite the risks we continue to face, including natural disasters.
As the dust settles on the flurry of home improvement projects you may have tackled since the pandemic began, and you prepare to settle in for the long winter months, now is the time to take stock of your belongings and make sure your insurance is as up to date as your house.
How Natural Disasters Impact Loss
With the intense focus on COVID-19, hurricanes have occupied less of our attention, but we experienced a very active season. There were 31 named storms in the Atlantic, 13 of which became hurricanes — six of them major.
Damages from Hurricane Isaias alone were estimated to have cost between $3 billion and $5 billion in insurance losses, according to S&P Global, with estimated losses to the National Flood Insurance Program, between $400 million and $700 million.
With more than 60 million people living in areas most vulnerable to hurricanes according to U.S. Census data, and an estimated 8.7 to 14.6 million homes at risk of flooding in the United States, according to First Street Foundation, suffering property loss from a weather-related event has become a reality for much of the country.
Weather-related events are joined by wildfires as the two greatest natural disaster threats.
A record-breaking number of wildfires consumed a great part of the western United States last year.
From January 1 to December 8, 2020, there were 52,934 wildfires that burned about 9.5 million acres as compared with 47,673 wildfires that burned 4.7 million acres in the same period in 2019, according to the National Interagency Fire Center. In California alone, wildfires burned a record 4.2 million acres in 2020, damaging or destroying 10,500 structures, according to the Insurance Information Institute.
Steps to Reevaluate Your Home Insurance Coverage
With so many of us spending more time at home and revisiting our surroundings with fresh eyes, now is a good time to review what is insured and what isn’t.
The following are steps every homeowner should take to ensure their insurance coverage is up to date.
1. Take Stock of Personal Property
If you imagine turning your house upside down, anything that falls to the “floor” (in this case the ceiling), is considered your personal property. Housebound Americans, forced to use their homes in new ways, have spent billions of dollars more than usual on DIY home improvement projects in 2020 with both Lowes and Home Depot reporting large rises in quarterly revenues.
As homes are spruced up with renovated spaces filled with new sofas, wide-screen televisions, and larger computer monitors, homeowners need to ensure their insurance also is upgraded to match this increase in assets.
2. Determine if an Item Should Be Covered
As you inventory your personal property, ask yourself if you could afford to suffer the loss of each item were it to be damaged, destroyed, or stolen. If the answer is “no,” then work with your insurance agent to agree on a valuation for the item.
3. Evaluate Your Personal Property
While new additions or upgrades to your home are relatively straightforward to its value, determining the worth or replacement value of items that have been acquired at a discount or are no longer available for purchase can be trickier.
Your insurance agent will help you to determine what coverage is needed to replace an item that is no longer available with something similar at current prices.
4. Ensure Your Personal Property Insurance Limits Are Up To Date
An underinsured valuable piece of personal property is a risk nobody should take.
Consider the client who contacted his agent to determine whether his Patek Philippe watch was covered by the family’s standard homeowner’s insurance policy.
He bought it in the 1990s and its value had increased by one-third to $30,000, much more than the scheduled personal property insurance limits of financial protection. He was advised to increase the limits to cover the value of the item in full.
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5. Add Supplemental Insurance if Necessary
“Other Structures” coverage, also known as Coverage B, is a part of a homeowner’s insurance policy that pays to repair or replace structures located on your property but not connected to your home, if they are damaged or destroyed by a covered event.
Many homeowners built swimming pools last summer since families were staying home, so this is where Coverage B came in.
Another type of supplemental coverage is “Loss of Use” coverage, also known as Coverage D, which helps pay for the additional costs when a covered event makes your house temporarily unlivable while it’s being repaired or rebuilt. Loss of Use coverage was a critical component of the homeowner’s policy during last year’s fires and hurricanes.
6. Make Clear Distinctions Between Insuring Your Home and Your Office
Is there a specific insurance ramification about insuring your home as an office as well? “Working from home” is permissible in a homeowner’s policy as long as there’s no foot traffic inside the home, which increases the liability exposure of the insured (i.e., slip and fall of a business customer).
If the homeowner will use their home as their office with staff working as well with them, then the space requires a different insurance coverage altogether.
Sitting at home or in the office (or in the “home office”) reading this, now is a good time to turn your house upside down and tally the items you cannot live without. Then, give a holler to your insurance agent and inquire if they are all insured to their current value.
Alan Umaly is president of Westwood Insurance Agency, a wholly owned subsidiary of QBE, providing customers with solutions and outstanding service — leveraging over 67 years of expertise through our distinctive expertise and stability in an ever-changing marketplace.