Last Updated: February 13, 2009
It's nearly impossible to read the daily news and not come across a story or two that details some sort of disaster affecting a home or homes in the U.S. — mud slides in California, ice storms in Arkansas, and house fires in New England. And more often than not, those news stories give one pause.
What would your homeowner's or renter's insurance policy cover if the water pipes in your home burst? Do you have the right kind of coverage if there was a fire in your home? What would happen if your home was destroyed in a mudslide? To be sure, such questions must be answered in the context of your entire financial plan. But in general, the National Association of State Insurance Commissioners reports that now is a good time to review your property and casualty insurance policies — especially given what's happened to the economy.
"Many households will enter the new year with a smaller budget and will seek ways to save money," NAIC President and New Hampshire Insurance Commissioner Roger Sevigny said in a recent press release. "Now is the time for consumers to get smart about their insurance and take advantage of the opportunities to maximize their coverage, minimize their costs and protect themselves financially."
In its release, the NAIC offered the following tips: In the last year, home prices nationwide declined 16.6 percent. With equity dwindling, it might make sense to review your homeowners insurance and see if there are any ways to save. For instance, consider:
- Insuring your home, not the land: Homeowners policies do not provide protection for your land, so make sure the value of the land is not included as part of your coverage amount, the NAIC recommends.
- Making sure you are receiving all the discounts to which you are entitled. Discounts are typically given to people who have more than one policy with the same insurer; have security or safety systems, such as smoke detectors, deadbolts and fire alarms; are 55 or older and retired; or live in homes located in eligible homeowners associations. Some insurers even offer discounts if all residents of the home are nonsmokers.
- Increasing your deductible: If your deductible is $250, raising it to $500 should decrease your premiums. Raise it to $1,000 and you could save even more. Just two caveats: 1) Make sure you can pay the higher deductible if a disaster strikes; and 2) Check with your lender, as some home loans have a clause that specifies a maximum property insurance deductible.
- Making home improvements. Update your electrical, plumbing and heating systems could improve the safety of your home and, therefore, reduce your premiums.
- Adding riders to protect jewelry or expensive items exchanged on Valentine's Day, birthdays and the like.