Home insurance options

If your home were badly damaged by a storm or flood, could you afford to pay for the repairs? What if it were totally destroyed? Few people have the resources to pay off their existing mortgage, rebuild and pay for living accommodations while the rebuild is going on.

Most standard homeowner insurance policies don’t cover floods or mudslides. On the other hand, it doesn’t pay to be over-insured. Before you sit down with an insurance agent to purchase or renew a policy, it pays to do a little research.

You don’t have to live next to a river to experience a flood, as evidenced by the tragic drowning of Seattle resident Kate Fleming last year. Fleming drowned in her basement after storm waters overwhelmed city drainage systems. A collapsed retaining wall then loosed a flood of water and debris into her home.

While this was an unusual situation, it demonstrates that floods can emanate from many sources, including storm drains. FEMA puts the West Coast at highest flooding risk from November to April.

“Anyone who lives in a flood area should look into the Flood Insurance Program,” said Hilary Young, spokeswoman for the Washington State Office of the Insurance Commissioner. “Most homeowner policies don’t include anything for flooding.”

The National Flood Insurance Program can refer you to insurance agents in your community willing to cover you even if you live in a floodplain.

A related insurance is landslide insurance. Winter weather or new construction can cause earth movement that damages your home. Just a simple shift can cause your house to be deemed unsafe. This may not be covered by either flood insurance or your standard homeowner policy, so you need to know what your risk is.

Most storm damage, other than flooding or mudslides, should be covered by a standard homeowner insurance policy. For example, if a windstorm caused damage to your home, this is often covered.

However, your home may not be covered if it is hit by tree debris, a common occurrence in our area. Make a note to ask specifically about tree debris coverage if you have large trees around your home.

Another gray area is water damage from burst pipes. It can make a difference whether these are inside or outside your home. It also makes a difference as to whether the pipes are owned by you, the city or your neighbor. Ask your insurance agent to outline the different scenarios.

Loss of power to your home is more than just a nuisance. Many homeowner policies cover electronics such as expensive TV sets when they are damaged by a power surge. Some may even cover the cost of food that defrosts and goes bad in your freezer. But you won’t likely get any compensation for that tank of exotic fish that slowly suffocate during the blackout.

If you’re a renter or condo owner, don’t assume that your landlord or condo association covers you and your possessions. Ask to see their policy and then cover yourself against any loopholes with a renter’s policy or other additional insurance.

Before you talk with an insurance agent, take time to write down all the things that could go wrong in your home. This includes fire, flood, storm damage, sewer back-ups and theft. Next, figure out how much you could afford to replace on your own. By increasing your deductible, you can save money on your insurance premiums.

On the other hand, if you have a lot of jewelry or collectibles or if you have a big mortgage on your home and other financial concerns, you may want to extend coverage to include an umbrella policy. This is a type of insurance that kicks in when you have exhausted the limits of your homeowner policy.

“The thing is to make sure that they know what they’re buying,” Young said. “There are policies that will pay just to replace the things in your home at replacement value, minus depreciation, versus what will pay the cash value that it would cost to replace it at today’s price, regardless of when you bought things.”

In other words, if you have a 10-year-old sofa in your living room, does your insurance policy cover just the replacement value of a 10-year-old sofa, or will it pay for a new one?

This leads into another area that many consumers forget. It’s vital to make an inventory of your possessions for possible insurance replacement. Today’s technology makes home inventories much easier than in the past. The State Insurance Commissioner’s office suggests using digital cameras such as those on a cell phone to record the condition and contents of your home. These can then be e-mailed to yourself or a relative or stored on a secure Web site.

It is also recommended that you create an inventory of your personal property, including model and serial numbers if available. This information can also be stored online or in a safe deposit box, along with your insurance information, so they’re right at hand.

An important step to take before signing on to any insurance policy is to look for complaints against the company. The State Insurance Commissioner’s office provides a list of insurance companies and the number of consumer complaints against them. All companies are bound to have complaints due to the nature of the business, but you should avoid any that have higher than the average number.

Once you finally sit down with an insurance agent to chat, don’t be surprised to discover the replacement cost of your home is far different from the home’s assessed or market values. It’s good to ask questions and make notes on what the agent tells you.

“Understanding the terms of the policy is the most important part,” Young said. “What we find with many claims is that people don’t understand what they bought. By then it’s too late. You can’t go back.”

Finally, the Insurance Commissioner’s office recommends that you protect your home against loss with some simple maintenance. Make sure smoke alarms are installed and functioning and keep your land free of debris and dangerous trees.

If the worst should happen, file your claim as quickly as possible and take photos of the damage. And, don’t forget to save receipts for reimbursement.