The wake-up call to homeowner’s insurance
by Christine Dunn

This morning I awoke to the sound of a loud fire engine siren signaling a strong warning. It was code, I later learned, for all firemen out. The home they had been trying to save had gotten too hot, and their mission shifted from trying to save the structure to trying to contain, and eventually put out, the fire before it spread to the neighbors’ lots.

You hear about fires but when you’re confronted with one that consuming it really drives home the depth of potential losses. In the case of my neighbor’s home, thankfully there was no one inside and so no risk to lives. But once you know everyone’s safe, your mind turns to the property itself, and the contents within. If it were my home, what would I hope most to save?

Family photos, definitely. Jewelry. The ever-present laptop. Artwork? Or the random things that hold memories like the handmade area rug I picked up on a trip to Istanbul before I got married…

And as the fire dies down into embers, you think, how does one rebuild?

It’s funny how quickly the practical lines of thought kick in with that question: Homeowner’s insurance. Is mine adequate? Did I ask all the right questions? What haven’t I thought of?

So I called the owner of my insurance agency, Mike Jansen of Sanviti Insurance Agency, and asked him: What are the three most common mistakes homeowners make when buying a policy?

Here’s what he had to say:

1. Underinsuring one’s home
“When people buy insurance, they’re not thinking about the devastation. They’re penny wise and pound foolish sometimes. The hardest thing to get people to accept is the house cost. People say, ‘why am I insuring for more than what I’m paying for the house?’

“We do a cost estimator. We have to determine the cost of replacing the dwelling in the event that it was a total loss. Unique features of a house a lot of times are not factored into the actual cost prior to the loss. For example, older structures have unique characteristics like using horsehair plaster. No one does that anymore. They use wallboard. But under the contract, the insurance company has to replace it with a similar value.

“Sometimes when people are shopping for insurance, they’re looking for the bottom line. You get what you pay for.”

[CONTINUE READING HERE: http://www.boston.com/business/personal_finance/blog/2012/06/the_wake-up_call_to_homeowners.html]