How to choose the right property insurance for you

Updated April 23, 2020

We’ve all been haunted by images of people who lost everything to a hurricane, flood or other natural disaster. All too often, though, people’s lives are overturned by more commonplace events – either because they’re uninsured, or they find out too late that their coverage was insufficient. Other unique events, like the coronavirus (COVID-19) pandemic, cause many to worry about their health and finances. Health insurance is extremely important, as is insurance for your home.

Here are a few tips for insuring your property:

Buy adequate homeowner’s insurance. Your home is probably your largest investment, so don’t risk losing it and its contents through an unforeseen disaster, accident or robbery. Review your coverage periodically to account for inflation, home improvements, new possessions, change in marital/family status, etc. Periodically, you may want to compare the rate you’re currently paying with what other insurance carriers charge – just be sure that you get “apples to apples” quotes, since different policies may have varying provisions.

Renters need insurance too. If you rent, the building itself is probably insured by the owner, but your contents are not. You – not your landlord – are responsible for replacing your possessions if they’re damaged or stolen. Visa Inc.’s free personal finance site, Practical Money Skills for Life, www.practicalmoneyskills.com/renters, features a how-to guide on renters insurance.

Replacement cost insurance vs. actual cash value insurance. Imagine if your 10-year-old television were destroyed in a fire. Replacement cost insurance would pay to replace it with a new TV, while actual cash value insurance would deduct 10 year’s worth of depreciation (wear and tear) from the payment amount, leaving you with considerably less. Replacement cost insurance usually costs 5% to 10% more, but can be well worth it.

Insuring expensive items. Most standard policies place limits on how much they’ll pay to replace certain expensive items such as jewelry, art and computers. Read your policy carefully and consider taking out additional coverage on such valuables.

Home inventory. Always keep an up-to-date inventory of your possessions to help settle insurance claims faster, verify losses on income tax filings, and determine your correct coverage amounts. List everything you own, including the make, model, receipts and purchase location. It may also be helpful to photograph or videotape everything, and be sure to store copies in a safe deposit box or at a friend’s house. Many personal finance software packages include an inventory program.

Liability insurance. This coverage protects you against lawsuits for bodily injury or property damage caused by you or a family member – even pets. Homeowners and renters insurance policies usually provide at least $100,000 in liability coverage, but you may want to add more, especially if you have significant property, investments or savings that would be at risk.

Disaster insurance. Standard insurance policies don’t cover damage related to floods or earthquakes, although hurricane damage may be covered. The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program (www.fema.gov/business/nfip) for homeowners and renters. FEMA sets the rates, so you don’t have to shop around. Keep in mind that there is a 30-day waiting period before coverage takes effect.

The last thing you want to worry about when disaster strikes is how you’re going to replace your home and possessions, so do yourself a favor and get the right insurance now, before you need to use it.