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6 Common Home Insurance Mistakes: You Could Lose Everything

 6 Common Home Insurance Mistakes: You Could Lose Everything

6 Common Home Insurance Mistakes: You Could Lose Everything
 6 Common Home Insurance Mistakes

Getting the right property and casualty insurance coverage may not be high on your list of financial priorities.

Compared to investment decisions and estate planning issues, questions about the language in your homeowners policy, for example, may seem hardly worth considering.

However, the more successful you are, the more complicated your asset protection needs become and the more you have to lose.

Suppose, for example, that in addition to your primary residence, a historic home, you also own a beach house and a condo in town.

The properties are in three different states. The value of his collection of abstract expressionist paintings has grown rapidly. And you just volunteered to serve on the board of directors of a charity.

Almost every aspect of this situation could cost you dearly. Insurance laws can vary greatly from state to state, different types of property require specialized coverage, and art collections, antique cars, and other unique items can be difficult to fully protect.

Meanwhile, serving on the board of directors of a nonprofit organization could expose you to additional personal liability.

Protecting yourself and your family may mean buying additional coverage, but more insurance isn't necessarily the solution.

Rather, it's important to review all of your needs, consider specialty policies or policy options, and coordinate your coverage with other aspects of your financial situation. Here are 6 different deficiencies that could prove costly.

 6 Common Home Insurance Mistakes

1. Leave gaps in homeowners coverage. Any homeowner should review coverage regularly to keep up with rising replacement costs.

But securing different types of homes in different locations poses additional challenges. If you buy insurance from more than one company, you may face conflicting rules, limitations, and policy renewal dates.

For example, the liability limit of a second home policy may fall below the minimum of an excess liability policy designed to supplement your primary home insurance. You could end up being responsible for the difference.

2. Ignoring the unique characteristics of the properties. One advantage of wealth is the means to own exceptional houses; one drawback is that they can be difficult to secure properly.

Standard homeowners coverage won't pay for the materials and labor needed to rebuild that 19th-century storefront you've painstakingly restored.

Coastal homes can face hurricane damage, while a location in the California mountains could be subject to earthquakes or wildfires.

Meanwhile, city cooperatives or condominiums may need policies tailored to cover their buildings or associations.

3. Low insurance of works of art and collectibles. Standard homeowners policies limit coverage for loss of antiques, furs, and other valuables. And while you could schedule additional coverage, insuring the real value of a collection of contemporary art or vintage muscle cars will likely require a specialized policy that addresses several critical issues.

How is the value of the collection determined? (You'll need a professional appraisal when the policy is drawn up, with frequent updates as items appreciate.

Will a damaged or destroyed item be paid for in cash, or will you be required to replace or restore it? Will additions to your collection be automatically covered?

4. Forgetting to insure domestic employees When someone works for you or your family, as a babysitter, landscaper, personal assistant, or in another role, they could be responsible for medical expenses and lost wages if the worker is injured on the job.

Several states require domestic employers to pay into a workers' compensation fund, while in other states it is optional, but providing such insurance may be required to ensure your financial well-being. If an employee drives your car, make sure it's listed on your policy, too.

5. Neglecting your responsibility as a board member. Excess liability coverage could help protect you if you are sued as a director of the board of directors of a non-profit organization.

Or for more comprehensive protection, you may want to consider special liability insurance for directors and officers.

6. Not getting frequent policy reviews and updates. Your financial life is not static, and neither are your insurance needs.

The value of a collection can increase; extensive home renovations could mean a sharp increase in your property value; and changing title to assets as part of your estate plan, or due to divorce, death in the family, or the birth of a child, may require policy changes.

Even in the absence of major events, you'll probably need a comprehensive review of all your insurance coverage at least every two years.


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