Why I Love/Hate Insurance
I own some investment properties that have done very well. In January one property had a pipe break in and sustained significant water damage; in March another part of that same property was completely destroyed by arson. Fortunately no one was hurt. Had I not been properly insured, I would have been financially devastated.
From these two incidents, I have learned a great deal about filing insurance claims and seeing the recovery process through to completion. The first, and probably the most important, thing you need to do right away is making sure your home and investment properties are properly insured. You must have the “endorsements” or “riders” appropriate for your needs. A generic policy may be an acceptable start, but pay special attention to what makes your circumstances and properties different:
- Do you use your home for a home-based business?
- Do you operate daycare from your home?
- Do you have unusually valuable items stored on the property?
Many of us have acquired a fear of talking with insurance brokers, expecting them to sell us extraneous goods and services every time we call. While some insurance brokers do fall into that stereotype, I have found that just a few questions about your policy can save you thousands when you need to file a claim.
- Will your policy cover just the Actual Cost Value (ACV) or the Replacement Cost Value (RCV)?
The ACV coverage means that insurance company will pay you what the property is worth had it not been damaged. That payment is typically much lower than what it will cost to repair or replace when you actually file the claim. If you, for example, buy a new car for $30,000, the new car immediately becomes a used car as soon as you drive off the dealer’s lot. If you crash your new car a block away from the dealership, your auto insurance, under the ACV model, may only pay out your claim based on the used car value and not the new car value. To have the insurance company pay for the full cost of the replacement, you will need the RCV coverage.
- Will your policy cover code upgrades and government-required retrofits?
The City of Livermore has a fairly new building ordinance that requires fire sprinklers in homes. Homes built a few years ago did not have such a requirement, but if you need to rebuild completely today in Livermore, the fire sprinkler building ordinance will apply. The new requirement may mean thousands of dollars in additional out-of-pocket expense if you do not have proper insurance coverage.
In the unfortunate event that you need to file a claim as a result of sustaining property damage, please be on guard when engaging the insurance adjuster. The insurance adjuster’s job is to minimize payments on claims. To do so, the insurance adjusters may try to have you sign a “Statement of Loss” or other documents in order to reduce the insurance company’s liabilities. Do not sign anything unless you fully understand the documents. Ask the insurance adjuster as many questions as possible, and always request the answers in writing.
For a large claim, hiring an independent adjuster or an attorney specializing in insurance claims may be a good investment, because these trained professionals can act as your advocate through the claim process. They understand the law, know the insurance lingo, and can help you receive the full benefit your are entitled to under your policy.
Related Articles
No related articles.
11:19 AM on July 24th, 2010
learned something new, thanks for the info!