Expert-Ease: Risky Business

Are you underinsured at home or on the road?

by Kate Yandoh

March 1, 2005

W hile there are definitely more scintillating reads than your insurance policy, knowing whether you have the coverage you think you do can mean the difference between an inconvenient incident and a life-altering tragedy.
 
According to the National Association of Insurance Commissioners, 72% of Americans believe they have the right amount of insurance. However, only 33% say they understand the details of their policies "very well." That's a lot of people operating on blind trust.

The Good News?
"Although common mistakes can be costly, everything can be corrected at anytime - you don't have to wait for your renewal period to initiate the process," explains Debbie Sumner, casualty claims manager for Allstate.
 
When evaluating your insurance coverage, the best place to start is often overlooked: liability coverage. Make sure your liability limits for all types of insurance areas generous as you can afford. In his book Insurance for Dummies, Jack Hungelmann says, "Always buy more liability insurance than you think you need - $500,000 or more. It's cheap stuff."

Risks On The Road
According to State Farm Agent Cheryl Sloan Parsel, simply going with the minimum liability coverage required by Georgia law (commonly referred to as 25/50/25, which means bodily Injury liability of $25,000 per person, $50,000 per occurrence, and property damage liability of $25,000 per occurrence) doesn't begin to suffice: "If you're driving around Buckhead and hit someone, most cars alone cost more than $25,000! If a person's hurt, there aren't just medical costs to think of, there's their potential loss of income. Just because you didn't have insurance to cover it doesn't mean you don't owe it."

Home Hazards
Odds are, if you've been in your house three or more years, you're underinsured -especially in Atlanta's red-hot real estate market. And if, like so many Atlantans, you've been feathering your nest with expensive home improvements, your existing policy won't reflect that. The responsibility lies entirely with you to up the amount for which your house is insured with your insurer. Find out your home's current replacement cost. Relying on your last appraisal isn't enough. The amount your insurance policy covers should reflect today's cost of construction, and it has nothing to do with the value of your land. A local builder can provide a realistic estimate.
 
Once you know your home's replacement value, the Georgia Insurance Commission recommends looking carefully at how your property is covered.
 
Actual cash value (ACV) means the current cost of the damaged property, minus depreciation for age, wear and tear. Replacement cost coverage allows you to replace items, and it usually costs slightly more than ACV. For security, you can purchase a "Home Replacement Guarantee," which covers rebuilding even if the cost exceeds your insurance amount.
 
With an increasing number of clients working from home, Allstate's Sumner frequently draws their attention to an important gap in their coverage: "If you run a business from home, your office equipment and anything you use to run that business requires a special rider to be covered. Even if you work for someone else, items you use for business, such as the laptop you bring home, wouldn't be covered under a standard policy." Consider a home-business endorsement or a separate business owner's policy.

Staying Insurance Smart
Go online to individual company sites or comparative ones such as insure.com and insweb.com, which offer quotes from hundreds of companies, or call an independent agent to find potential savings.
 
Scheduling a regular insurance "check-up" with your provider gives you a chance to bring your coverage up-to-date, consider opting for higher deductibles, and ask specifically about discounts for safe driving, association membership, good health, security devices, insurer loyalty and training courses, to name just a few.

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Resources
www.gainsurance.org (GA state commissioner's site)
www.naic.org
www.insure.com
www.Insweb.com
http://clarkhoward.com/library/insurance.html
Insurance for Dummies, by Jack Hungelmann

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Researching this story made writer Kate Yandoh feel as uncovered as the summer she went for the strapless bikini.