About two-thirds of homeowners are under-insured and more than 60 percent of renters do not carry insurance. When a gas explosion leveled three buildings in Manhattan's East Village, Nora Brooks was among the hundreds of New Yorkers who lost everything they owned. Nora and her husband watched their house burn and collapse after hours of relentless flames.
Across the United States, a fire occurs every 23 seconds, and burglars break into homes at an almost equal frequency. Bad things happen, which is why it is better to have homeowner's insurance ahead of time, rather than after the fact. Your standard home insurance policy will cover fires, thefts and explosions, but it may not cover sewage backups, floods and earthquakes. You want to check to see that you have not agreed to minimum coverage. To do this, dust off your policy and check the clauses.
What do financial advisers recommend? First, your home insurance policy should cover burst pipes, indoor flooding and floods that hit the entire neighborhood. Each type of flooding will have different levels of coverage, so you should clarify these things ahead of time. Next, you want to have sewer backup coverage because your standard policy will not cover destroyed furniture from a flooded toilet or pipeline replacement. You will also want replacement coverage, which replaces damaged or stolen goods. Check to make sure that the company will not deduct depreciation from its original value.
According to the Insurance Information Institute, the minimum liability for home insurance is $100,000, and this usually does not cover everything. To purchase the proper amount of liability, look at your assets. You want a minimum of $1 million worth of umbrella coverage on top of the homeowner's liability limits. While most homeowners have insurance because their mortgage lender requires it, your average lender does not have adequate insurance.
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