Property and casualty (P&C) insurance is a category that includes liability and property protection aimed to cover costs associated with unexpected loss, damage, or legal matters related to an accident. It’s common for people to have P&C policies that cover big-ticket items in their lives, such as homes, automobiles, and other personal items of significant value. This type of insurance coverage can go a long way in providing peace of mind. But, sometimes it falls drastically short of expectations when the need arises. What is the main reason? Lack of oversight in adjusting your insurance policy when circumstances change. We’ll highlight four insurance risks that can sometimes fall through the cracks and put you and your family in unnecessary peril.
1. Increased Costs
Costs have gone up on everything. This means that the replacement costs on your home have most likely increased quite a bit since you originally opened your homeowner’s insurance policy. A quick way to determine if your coverage is still adequate to fund replacement costs is to follow the formula below:
Insurance coverage limit divided by the square footage of your home = cost per square foot to replace
For example, a $1 million insurance coverage limit divided by the 2,500 square feet of your home = $400 per square foot available for replacement costs
If the final number equals less than $300 per square foot, you are underinsured. You should contact your insurance broker to adjust your policy limits to a more suitable amount.
Even if you haven’t completed a full home renovation, most people have done some sort of updating or home improvement project within the past ten years. These improvements can significantly increase the value of your home. But they can harm your replacement coverage if your policy limits aren’t updated to factor in the new value.
Similarly, if you’ve done some remodeling on your home, it’s essential to reach out to your broker. You want to ensure your policy limits align with requirements to replace your home as it is now versus when the policy was created.
Having a child graduate from high school is a celebratory and pivotal moment in your family’s life. Typically, this is the time when most kids go off to college or move out on their own for the first time. This milestone triggers a significant change needed in your insurance policy coverage. Since your child has moved out, they are no longer considered a “household member.” Coverage no longer applies to them.
Most people assume if they are paying the same premiums, the same coverage will remain intact. However, coverage immediately vanishes for any family member no longer living inside the household. Whenever you have a child leave the nest, be sure to let your insurance broker know so you can add coverage or determine the best solutions for your family’s needs.
4. The Fun Stuff
Did you buy a boat and forget to call your insurance agent? It happens more often than you might think. People tend to get so excited about the purchase of items like boats, motorcycles, e-bikes, ATVs, golf carts, jet skis, snowmobiles, and other fun toys, that insuring them can unintentionally fall by the wayside. Or they just take it out for a quick spin and plan to call their insurance agent in the morning.
We can’t tell you how many times this has ended in a total loss of an expensive, highly desired item on the first day of ownership. And in the worst cases, it can destroy an entire balance sheet in the blink of an eye. It’s best to contact your insurance agent before you even bring the new toy home. The first test-run is always more enjoyable when you know you’ve got the proper insurance coverage along for the ride.
This is also a best practice approach anytime you fall in love with something that holds significant monetary or meaningful value. Items such as jewelry, art, and antiques are regularly included in P&C insurance policies, and for good reason. At Fit Insurance, we had a recent experience with a client whose dog chewed up a very treasured, priceless rug from overseas which was insured as fine art. As a result, our client received full payment for their loss and was ecstatic to have the proper coverage in place.
We are sharing these stories and key points to help you recognize and avoid these four insurance risks. Always reach out to your broker when your life circumstances change. Because that change often runs hand-in-hand with the need for an updated policy. Not to mention, it’s always nice to check-in and know where you stand when it comes to protecting yourself, your loved ones, and the assets you’ve acquired. If you have any additional questions or have had a significant change in your circumstances, reach out to your Coldstream advisor and we’d be happy to help.