Military Officer - November 2006 - (Page 62)

A ALMOST 20 YE A RS AGO, Unfortunately, many other tornado victims found out too late that it wasn’t OK to just have insurance — having the right insurance is key. Gaps in insurance coverage led to signiﬁcant ﬁnancial losses for many of my neighbors. To help you avoid making the same mistakes, here’s some information to use as you evaluate your property insurance coverage and tips to avoid its pitfalls. my home was destroyed by a powerful tornado that hit without warning in the middle of the night. I was happy to be alive, and the last thing I was worried about was my insurance. But when the dust settled, I discovered that my house had been totally leveled, and I had lost all of my personal possessions (my checkbook was found 30 miles away). I was relieved to learn that my insurance coverage was adequate and would make me ﬁnancially whole again. Your insurance company will compute a replacement cost based on the current market price for labor and materials in your locale. Conﬁrm that it is using the correct information about your home, including square footage, number of baths, and anything that makes your home unique, such as marble ﬂoors. Don’t worry if the replacement cost isn’t the same as its market value. In fact, if it is, you’re probably overinsured, because market value includes the cost of the land, which can be signiﬁcant depending on where you live. Your home’s contents usually are covered at an amount equal to a percentage of your home’s replacement cost. Jack Hungelmann, author of Insurance for Dummies (For Dummies, 2001), recommends estimating the replacement cost of all major items (don’t forget sales tax), doubling it, and then adding any out-of-the-ordinary items you have, such as your son’s hockey equipment, to see if this automatic coverage is enough. Things really get complicated with respect to cause-of-loss and coverage amounts for your belongings. Basic policies will not always cover some of the typical reasons for loss, such as breakage, but you can replace Aunt Frieda’s crystal after it’s been smashed by a runaway ball by buying additional insurance. Ask your agent about the best way to cover your valuables. Jewelry is especially vulnerable. People are surprised to learn that the theft of jewelry is usually covered at only $1,000 a claim in a standard policy, and there’s no coverage at all if a stone falls out of a setting — which is a fairly common occurrence. One method to protect your jewelry and other valuables is through scheduling, which means listing each item and providing a reasonable estimate, usually an appraisal, of its replacement cost. The cost of this insurance is based on the total value of the items scheduled, so remember to add and remove items as necessary. If you’re an avid gardener and have sunk a lot of money into your yard, see if you can insure it separately. Detached structures, such as sheds, usually are covered, but most basic policies do not cover landscaping. One of the main reasons insurance claims are denied is because we can’t remember or prove we had the item or substantiate its value. My biggest nightmare was trying to recall everything I owned and write it down. How many blouses did I have? Did I Your home Let’s start with your home. Most policies come in one of two forms: broad form or special form. Broad form must list the cause-of-loss on your policy for it to be covered, while special form covers every cause-of-loss that isn’t speciﬁcally excluded. Broad form covers the majority of perils that can occur, such as ﬁre and theft, but won’t cover your loss if, for example, a bear walks in your back door and tears your house apart looking for food. Most policies today cover 100 percent of the replacement cost of your home — if yours does not, pick up the phone now and change it. One of my neighbors had a policy that took the age of his home into account, and he personally had to absorb more than 50 percent of the cost of rebuilding. 62 MILITARY OFFICER NOVEMBER 2006

Table of Contents Feed for the Digital Edition of Military Officer - November 2006

From the Editor From the President Your Views MOAA Directory Rapid Fire Washington Scene Financial Forum Ask the Doctor Chapter Activities Cover Story: Financial Guidebook Got (the right) Insurance? A Penny Saved, a Degree Earned The “Y” MOAA Scholarship Recipients Pages of History Information Exchange Member Books MOAA Scholarship Donors MOAA Member Services Advertising Index MOAA Calendar Sounding Taps Encore

Military Officer - November 2006

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