Increase Your Homeowner's Insurance Policy

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(ARA) - Now that summer is here, the warm-weather wave of home remodeling is in full swing. Remodeling quickly increases a home's value, but many homeowners forget to up their insurance coverage to match. A recent survey of homeowners uncovered a coverage gap that can make for financial headaches if disaster hits.

Home remodels are a smart move: they help keep your house up-to-date and comfortable, while further increasing the value of your house and property. In fact, with a kitchen or bathroom remodel, homeowners can expect to recoup on average 90 percent of the cost of the project at resale. This is probably one reason why the U.S. Census Bureau of the Department of Commerce reports that expenditures for improvements and repairs of residential properties in 2004 were estimated at $198.6 billion.

However, as homeowners are spending billions on improving their home and property, many are not adequately adjusting their homeowners insurance to cover their home's new value.

Home repairs can be a huge financial investment, and if you haven't adjusted your insurance policy to cover them, it could mean financial disaster. A recent survey revealed that a majority of homeowners are not upgrading their insurance when they upgrade their homes. Commissioned by Fireman's Fund Insurance Company and conducted by Harris Interactive, the survey revealed a troubling knowledge gap among a majority of affluent homeowners of their insurance coverage.

"Unfortunately, it is often not until a disaster such as fire or hurricane strikes that homeowners realize they haven't reevaluated their homeowners insurance to include recent remodels," says Scott Garfield, vice president, personal insurance, Fireman's Fund Insurance Company. "Homeowners are suddenly faced with the harsh reality that their insurance policy covers what their house used to be -- a two-bedroom fixer-upper, not the state-of-the-art four bedroom it has become."

According to the survey, while 94 percent of the respondents nationwide stated that the value of their home increased during the past five years, more than a quarter (27 percent) said they had not increased their insurance coverage. Some of the most common reasons cited were lack of time to look into the need to increase coverage and simply not knowing that they needed to change the policy's limits to reflect a home's change in value.

If you are spending the time and money making upgrades to your home and property this summer, be sure to give your insurance agent a quick call to ensure the true value of your home will be covered in the unfortunate event of a disaster.

Experts recommend reviewing your insurance coverage on an annual basis to make sure that upgrades to the home and its contents are included. Going through the following checklist will help ensure that your home is adequately covered, and could save you money as well.

* What is the replacement value of your house?

Your homeowners insurance should be based on the replacement value of your home, not the market value. Work with your insurance agent to calculate the replacement cost of your home, including current cost of labor and materials. Especially if you live in an older home, replacing items such as leaded glass windows, solid brass fixtures and hand-painted tiles could prove costly. Also, take into consideration any changes in building codes. Changes in building codes could mean that you would need to upgrade windows, add safety rails, or upgrade plumbing and electrical systems.

* Have you made any significant changes to your home?

Remodeling and redecorating can add to the replacement value of your home, so changes should be considered when evaluating your homeowners insurance. Major upgrades such as remodeling kitchens and baths; building porches, garages or other structures; refinishing the basement; adding a home theatre or media center can significantly add to the value of your home, but so can seemingly minor changes such as upgrading fixtures, adding expensive wall coverings, faux finishes or window coverings, and landscaping. Discuss improvements or additions with your agent to ensure adequate coverage.

* Have you taken a home inventory lately?

You should have an inventory of everything in your home you would want replaced in the event of a disaster. Not just furniture and furnishings, but also clothing and collections of any kind including art, books, DVD, CD, wine, etc. Update this list annually and let your agent know of any major changes.

* Have you recently bought jewelry, fine art, silver or furs valued above $1,000?

Valuables worth more than $1,000 may not be adequately covered under a basic homeowner's policy and should be "scheduled. " Discuss this with your agent.

* Have you started a home business?

Don't rely on your homeowners' policy to protect your home business. In addition to coverage for office equipment such as computers and fax machines, your business may require coverage separate from your homeowners' policy. Discuss endorsements to your existing policy with your agent.

* Have you purchased a home safe?

Storing valuables included in a scheduled valuables policy in a permanently attached Underwriters Laboratory, Inc. (UL) listed home safe, not only can give you added peace of mine, but may also qualify you for a reduction in insurance rates.

* Have you installed an alarm system?

If your home upgrades included central-station fire or burglar alarms with 24-hour monitoring, your insurance rates might decrease.

* Are your homeowners and auto insurance with different companies?

Insuring your home and car with the same company may save you money, and having one insurance agent will simplify your life.

Editor's Note: A summary of the complete survey mentioned in this article is available online at: http://www.firemansfund.com/dcmsSites/about/pdf/FiremansFundToplinerev2.pdf

Note: This article was submitted by a second party and the contents are subject to our disclaimer.