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September 26th, 2008
Insurance – it's on you

President’s Column, Texas Association of REALTORS®

Insurance – it’s on you

Too often after a family has an insurance claim, we hear that they were underinsured. Many homeowners believe that they’re covered for particular events or think they’ve got enough coverage, only to be unpleasantly surprised when they review their policy after a loss.

So whose job is it to decide the appropriate level of coverage? It’s yours. Let me refine that a little bit … it’s not your job, but it will absolutely be your loss if you don’t have enough protection to get back on your feet after an insurable event occurs. Your role in this is to do your research. Have a good idea of what it would cost to recover from an incident and determine how much coverage your need.

Home sweet home

Homeowners insurance typically covers loss from storms, fire and theft, plus any additional events that are outlined in your policy. It’s possible to purchase a policy that covers the dwelling only; however, more commonly, homeowners buy insurance that combines five different coverages into one policy: the dwelling, loss of use, personal property, liability and medical payments.

The unlivable castle

If your house becomes uninhabitable because of a covered event, most policies in Texas will pay for normal living expenses as a result of having to find alternate living arrangements while your home is being repaired. Make sure yours does.

All those things

We’ve discussed the house itself, but what about your stuff like furniture, appliances and clothing? There are two main coverage strategies. Actual cash value coverage pays you the amount it costs to replace an item, minus depreciation. Replacement cost coverage requires a higher premium, but gives you more protection than actual cash value – the insurance company must pay what it costs to replace the item with a similar item.

Don’t wait until a disaster occurs to find out if you’ve got sufficient coverage for your possessions. It’s good practice to take pictures or video of your belongings. Keep receipts for large purchases and record the serial numbers of electronics. This practice requires a commitment to a periodic re-evaluation of your personal property.

Legal liability

Personal liability coverage provides protection in the event that you or a member of your family is found legally responsible for another person’s injuries or damage to their property. Check with your insurance agent to verify your level of coverage.

My ankle!

Your coverage should also include medical payments for people injured on your property. This protection also extends to injuries that may occur off your property, such as your pooch biting someone in your neighbor’s yard. Basic coverage is limited, but you can expand your policy, as well.

Wind and water

Damage from hurricanes and tropical storms can extend far beyond a few miles inland. You should check to see if your policy protects you against damages incurred during these storms – many policies do provide this type of coverage, but ask your agent. Residents in the 14 coastal counties of Texas can purchase hurricane and windstorm insurance through the Texas Windstorm Insurance Association if their insurer excludes it from the policy.

Floods are not included in most standard Texas homeowners policies. Flood insurance covers damage caused by rising water and can be purchased through the National Flood Insurance Program, which is administered by FEMA.

Got a CLUE?

About 90 percent of the insurance providers in Texas feed into the CLUE (Comprehensive Loss Underwriting Exchange) database, which is used by insurance companies when evaluating potential clients. This database contains the last five to seven years of property loss claims.

As a homeowner, federal law gives you the right to review your CLUE report at any time. If an error is discovered, it can be disputed with ChoicePoint. The company will contact the insurance company that placed the item on the report and attempt to resolve the dispute within 30 days.

Homesellers may want to provide potential buyers with the CLUE report to show their property has had no claims. Buyers may want to request that sellers provide a CLUE report to find out about the property’s recent history and discover how claims were handled.

In the end, it’s up to you

There are different kinds of insurance for all different needs. If you’re a renter, you can get insurance to cover your possessions. Your landlord’s insurance doesn’t cover damages to your possessions. If you’re a landlord, you can obtain insurance designed for your needs – this may include loss of income if the property becomes uninhabitable due to an insurable event.

If you’re buying a home, consult with your Texas Realtor about the importance of adequate coverage, especially if you’ve never owned a home before. Your insurance agent can offer guidance, but ultimately, it’s your responsibility to determine the level of coverage you need.

For more information about buying and selling property in the Lone Star State, please visit TexasRealEstate.com.
Submitted by Amy DuBose
Association Executive – San Marcos Area Board of REALTORS®

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