Homeowners should consider replacement costs, deductible

by Steven Diegel

SBJ Contributing Writer

The process of seeking and maintaining adequate insurance coverage can often prove a challenge for today's homeowner, who must contend with different policy options, what to cover, and the overall financial stake.

Area insurers offer a variety of advice on buying homeowners insurance. They suggest purchasing a broad, comprehensive policy and taking a hard look at some of the optional coverages best suited for the homeowner's particular situation.

"You want to get the broadest coverage that is available," according to Anita Brown, an insurance broker with Coonrod and Worley Insurors Inc.

Brown said most insurance providers offer a general coverage policy in a standard HOÐ3 homeowners package. But sometimes, additional coverage is required to protect the replacement of possessions and the dwelling itself, not to mention other valuables.

"As far as extra coverage, you should look for replacement-cost coverage in the policy," Brown said.

An example of this coverage at work would be an older model refrigerator lost to electrical damage. Many insurance policies would account for the item's age and scale the value downward ÐÐ an adjustment which would not help the homeowner to replace it.

"But if you have the replacement-cost coverage, when you go to replace it they will pay for a refrigerator of comparable kind to what you had," Brown said.

Other personal possessions from dishes to clothing are also typically covered under such provisions.

Insurors also advised obtaining replacement-cost coverage on the dwelling itself, so, in the event the home is lost, the homeowner can receive compensation to purchase one of like kind.

"Replacement costs are important on both contents and dwelling," according to Charlotte Hennigh, of Man-Morris Insurors Inc. "It will go up a small amount each year, but it is worth keeping up with the costs to cover what you have."

An inflation guard can help protect against a loss of relative value of the dwelling, as homes generally appreciate in value over time. This clause automatically adjusts the amount of coverage each year for inflation and appreciation.

"This protects your home against the cost of inflation," said Doug Spracklen, an agent with Preferred Risk Mutual Insurance Co. "Homes usually appreciate over time if they are kept up with."

Spracklen and others encouraged policyholders to keep up to date on exactly what is covered, especially in the event of loss or theft of personal property.

"There are limitations written into the policy in terms of what is covered in case (valuable items) are stolen," Brown said.

Policies often have limitations on how high a value will be covered for personal effects typically up to the first $2,000 or so in most standard policies. Insurers recommended a "floater" policy, which is tied to the homeowners policy but carries a separate deductible for such items.

"That is really important if you have expensive items such as jewelry or furs or fine arts," Brown said. "A regular

homeowners policy would have problems adjusting the value of these items."

Antiques and other rare items are especially difficult to insure, for while difficult to replace, the actual value of the item can vary significantly.

"Antiques are hard to insure properly," Brown said. "Their value is really in the eye of the beholder ÐÐ one dealer can appraise it very high, another very low."

Those seeking to insure such items are encouraged to check with a number of insurers and their adjusters research which can typically make a great difference in the overall policy.

Deductibles can also vary for homeowners depending upon the coverage desired, with higher deductibles generally translating to lower monthly premiums.

"The standard deductible is $250, but you can increase this to $500 and the premium will go down," Brown said. "Some have a $1,000 deductible ÐÐ typically the more expensive homes, to save money on the premium."

Insurers said that each deductible has its advantages and drawbacks, and again homeowners should base their decision on what level of insurance is desired.

Spracklen pointed out that the average homeowner files a claim once every 11 years, and should consider the long-

term savings from having a higher deductible.

"I always recommend a middle-of-the-road deductible," Spracklen said. "The average savings an a home is $50 to $60 a year by going to a $500 deductible, so it won't take long to come out ahead."

Most damage under $500 can probably be absorbed or repaired by the homeowner, according to Spracklen, helping to avoid costlier premiums.

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