Home insurance is based on the cost of rebuilding your home and replacing personal property if it is destroyed. To curb rising claim costs, many insurance companies are limiting payouts to the estimated value of a home, plus a certain percentage, instead of the actual cost of rebuilding. In addition, some policies insure your home for the full amount of rebuilding exactly as is – but if building codes have changed and you must meet them, your insurance coverage may not be adequate.
If a major disaster such as an earthquake or wildfire strikes, the cost of building materials and construction labor can push rebuilding costs well above policy limits. You could find yourself underinsured.
Insurance Coverage Tips
Here are key tips to keep in mind as you review your home-insurance needs:
- Consider extended or guaranteed replacement cost coverage rather than an actual cash value policy. An extended replacement cost policy covers 100% of the value of the home, plus a percentage to cover rebuilding the home in today’s market. A guaranteed replacement cost policy will pay whatever it costs to rebuild your home.
- Make sure the policy covers the cost of bringing your home up to current building codes. This is especially important with older homes where electrical wiring and plumbing may be outdated. Ask for an ordinance or law endorsement that pays a specified amount toward these costs.
- Increase your coverage after completing a major home improvement project or making a significant purchase for your property. In addition, you may want to include extra coverage if your home is custom-designed with unique, unusual features.
- Add an inflation guard clause to your policy. This clause adjusts the dwelling limit automatically when you renew your policy to reflect current construction costs.
- Evaluate your need for earthquake or natural disaster insurance. Find important information about preparing for a disaster from the California Department of Insurance website at www.insurance.ca.gov or by calling 1-800-927-HELP.
You can also find more information on the California Department of Insurance Web site, www.insurance.ca.gov. Californians can compare insurance companies, find agents and get the latest news and tips about pertinent insurance topics. If you don't own your own home, click here to read about renter's insurance.
Time to Review Your Coverage
According to the Insurance Information Institute, you should review your home insurance policy:
- When you receive policy renewal notices. This is your opportunity to update or change coverage based on your current needs.
- When you complete a home improvement project or make major purchases that add value to your home.
- If you add improvements that make your home safer, such as a fire or burglar alarm system. You may qualify for a discount.
- If your family experiences a significant lifestyle change, such as a divorce or adult children moving back home. The value of belongings in your home may change drastically.
- If you have valuable jewelry, consider getting an insurance appraisal and scheduling it on your insurance policy. Most policies limit the coverage available for the theft of jewelry to $1,500. If you already have jewelry scheduled on your insurance policy, consider getting a new appraisal and updating your coverage limit if it has been a while since you scheduled it or last updated the coverage limit.
The policy also has other special limits of liability for the loss or theft of such items as, but not limited to: fine art, coin and stamp collections, furs, and silverware to name a few. Review your insurance policy and consider if you have a need to schedule any other personal property.
Source: Insurance Information Institute, www.iii.org.
Tips to reduce the cost of home insurance:
- Keep your deductible as high as you can afford.
- Don't file minor claims.
- Consider insuring your home and auto through the same insurer, who may offer a discount.
CTA Home Insurance Program
It's good to shop around for home insurance. CTA’s home insurance program is offered through California Casualty. This program offers many exclusive benefits for CTA members, including $0 deductible protection for your personal property used in the classroom and any fund raising money or goods while in your care at school. The program also builds in Educators Excess Liability Coverage to give you an extra layer of classroom liability protection. For a quote or more information, call 1-866-680-5142, or visit www.calcas.com/cta.