On The Casualty Front: Keeping Home Coverage Up To Par

Take a turn to casualty protection, and start with basics: the homeowner's package. The truth is that the average homeowner's insurance policy rarely gets attention more than once in three years - when the agent calls to renew it.

Even then, the process has become so routinized that the average householder cannot tell you, off the top of his head, what's covered, what isn't, for how much or how little. An impartial national survey not long ago showed that, in the light of what inflation has done to replacement prices of most things - from restoring a room after a fire to replacing stolen furniture - the majority of UK. householders are under-insured. If you haven't done so in the past year, now is as good a time as any to dig out your homeowner's policy and compare its coverage with your family's current requirements. Here are some checkpoints to consider:

Scope of perils covered. If yours is a "basic" homeowner's policy (the industry's HO-1), your property will be protected against 11 perils, ranging from fire or lightning, windstorm or hail, to explosion, riot, vandalism and, of course, theft. If, after examining your policy, you feel you also need coverage against the damage of plumbing freeze-ups, water or steam leakage, falling objects and the weight of ice or snow, you may consider stepping up to a "broad" homeowner's policy (HO-2) - it guards against 18 perils. Of course, "comprehensive" homeowner's (HO-5) goes even further, protecting against nearly everything except cataclysms such as earthquake, landslide, flood, tidal water or tidal wave, and war and nuclear radiation.

What is covered and for how much? Typically, homeowner's insurance covers the basic dwelling (including attached garages and additions), other structures (detached garage, guest house, tool shed, etc.), personal property on and off the premises, and liability for injury or damage to others. Note that an extra garage that you might rent out will be included in the coverage, but any other buildings used for commercial purposes or rented or leased to others will require additional coverage.

The amount of coverage on your basic dwelling is all-important under homeowner's insurance, since it governs other important elements of a policy. If a £40,000 house, for instance, is insured for its full value, up to £20,000 (50% of the dwelling's coverage) is the limit on personal property recovery. The ceiling on appurtenant structures is £4,000 (10%), and up to £8,000 (20%) is allowed for additional living expenses should you and your family be forced to live for a time in a hotel and ea t in restaurants. Using those percentages, a policyholder can quickly judge whether he's adequately covered.

Insurance companies generally require that in order to qualify for full payment in any partial loss under homeowner's insurance, a dwelling be covered at least to 80% of replacement value. The difference between that and 100% is for the homeowner to choose. Although insurance companies are rarely called upon to pay off total value (even in the worst fires, the foundations generally survive in useful shape), carrying less coverage shrinks the auxiliary benefits; in the £40,000 house example, dropping coverage to £32,000 would mean cutting personal property coverage to £16,000 (50%) and the other benefits proportionately.

In deciding whether your present insurance is adequate, remember that it is replacement value that you must cover. This is not necessarily the same as market value of a property, which also includes value of the land, landscaping and any out-buildings. A rule-of-thumb that claim adjusters follow is to measure the square footage of the house and multiply by local per-foot cost of building (any professional builder or real estate man can tell you what it is in your area).

It is vitally important that homeowner's coverage be at least 80% of the current cost to rebuild the house. If it falls below that percentage, the insurance company is not bound to fully restore damaged portions of the building. It can simply depreciate the value of the damaged property on the basis of its age, and pay you accordingly. To get the repair job done, you would have to dig into your own pocket for the remainder. That can be an increasingly large bite as building costs rise; a recent survey shows that, in three years time, these costs have jumped about 25% to 35%.

Certainly, if anything of value has recently been added to the family furnishings, such as an antique or two, an inherited oil painting, say, or new and expensive furniture, the time is ripe for an inventory. Figure up your total replacement cost and weigh it against your coverage. Wisest choice is to consult an insurance man on "floaters" and separate insurance on objects of high value.

Note, too, that it's also smart to photograph such objects in their customary place in your home, and file the pictures away with bills of sale, appraisals or other proof of value. Such foresightedness can save time and perhaps many pounds if claims of loss ever have to be filed.

Liability insurance is included in the homeowner's package, typically £25,000 to cover a single mishap, £500 for the medical expenses of others, and £250 to cover physical damage to the property of others. By today's standards in most parts of the UK., these are minimums, not maximums, of coverage. If yours are this low, they deserve special attention.

Trimming your premiums. Homeowner's coverage is generally considered an insurance bargain, but meeting today's protection demands can boost premiums. One type of cost-cutter to explore are deductibles. Indeed, most forms of homeowner's policies include a £50 deductible - when a loss occurs, the owner pays the first £50, collecting the rest from his insurer. (This is the so-called "disappearing" deductible; when a loss exceeds £50 the insurance company generally absorbs some of the deduction until, at £500, it pays the whole loss up to the limits of the policy).

Particularly for owners of large, expensive properties, higher deductibles - say of £100, £250 or even £500 - can materially cut premiums.

Shopping for coverage is another way to cut costs. While relative hazards and property values determine much of your insurance premium, another factor is the casualty experience of the company that writes it - if it has had a lot of homeowner claims, its homeowner premiums will likely be higher than those of a company that has had fewer pay-outs.

Shopping, however, should not take precedence with older homeowner customers - unless they feel they are really being had. Insurance industry insiders say that the best arrangement, despite a few pounds difference in premium, is to carry your homeowner's coverage with the same agent who has your life insurance and other policies. "It gives you a great deal more leverage," one industry veteran notes, "when it comes to getting any claims handled quickly and favourably. It's worth a few pounds extra."

Nowadays, insurance companies also offer packaged homeowner-type coverage for people who rent or lease their dwelling. Such policies, of course, do not cover the premises, but they do protect against the usual hazards to the personal property of the tenant.

That coverage, as with homeowner's, extends to losses incurred while away from home. Most standard policies set a limit of £1,000 on any one theft. If you're in the habit of carrying expensive photographic or sports gear it is smart to be sure your loss exposure is covered.

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The Big Push To Income Protection

Loss-of-income coverage, says an independent Englsih insurance consultant with obvious enthusiasm, "is really big today."

Indeed it is. About 60-million English people pay well over £1-billion in premiums, quite apart from their medical coverage, to be sure that at least part of their income continues if they become lengthily sick or disabled by accident. Equally dramatically, disability insurance, once thought of as the protector of the modest wage earner, has come up in the world.

In the past two years, company after company has come forth with coverage that will pay up to £3,000 a month to a policyholder suddenly unable to work. No one is allowed, of course, to turn a profit... see: The Big Push To Income Protection