Outdated Home Insurance Can Cost You


It's an unfortunate fact of life: When the economy tanks, property crimes such as burglary, theft and robbery rise.

And now that our economy is really tanking, some are expecting a big increase in these crimes during 2009. "What you'll see is more people taking advantage of an opportunity, a window they see ajar or a house where they see the owners have just left, rather than a big planned burglary," says Thomas Smith, a security consultant in Los Angeles.

Before making sure your home is as secure as it could be, it's not a bad idea to look at your insurance coverage since your property and your situation may have changed since you first bought the policy. "The biggest change for many people is jewelry," says Tim O'Brien, director of private client services at insurance broker Cook, Hall & Hyde in East Hampton, New York. "The jewelry box in the master bedroom is often a burglar's first destination. Even for someone who may not have much jewelry, the gold you bought 10 years ago is worth five times more today. Is that reflected in your policy?"

Most homeowners' policies cover jewelry, but there's usually a general limit of up to $1,000. Expanding that requires a rider on the policy to cover more expensive items. "This is where you'd need an appraisal to show how much it's worth and how much it would cost to replace," says O'Brien.

A good question to ask your agent is how claims are handled. In some cases, after you report a loss and show an appraisal, an insurer could come back and challenge the appraisal as inflated. "Insurance companies have become very careful," says Smith. "If you've got an old Rolex your grandfather gave you and your appraisal shows it's worth $7,000, they're going to see if they can't find that same watch in the same condition for less."

Check if inflation is included in your policy. "There are some carriers out there that will allow for the replacement cost of an item," says O'Brien. "It pays to take another look at your policy now when you don't need to."

If the policy seems adequate for your home, the next step in an insurance review is to look at how to lower your premiums. Here are tips to find some insurance savings:

Claims-free discounts: Just as an insurer will likely bump up the premiums on people who file lots of claims, if you go three to five years without making a claim, many of these companies will give you a discount of up to 15%.

Remodeling discounts: Have you renovated your house recently? Added a new room or remodeled the kitchen? Many people know that an insurer will discount a premium by 10% or more for a renovation, but the definition of "renovation" isn't universal. For Insurer A, you may have to add a few rooms, while Insurer B will give you the discount when you add some new appliances.

Non-smoker discounts: Smokers tend to file more claims, so if you don't smoke and you pledge to keep your house smoke free, you can get up to 15% off.

Retiree discounts: If your mortgage is paid, you can get a few percentage points off, or if you're retired, that could also put money in your pocket. Insurance companies reason that retirees are likely to spend more time around their homes and will have problems attended to faster than if they were busy with their careers.

Live-in discounts: A live-in housekeeper or other type of 24-hour domestic employee can give your premium a little cut. Again, insurance companies like to see someone at the property all the time to prevent the possibility of a break-in.


—For the best offers on homeowners, health and auto insurance, visit BankingMyWay.com's Insurance Center.

Show Comments

Back to Top