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Filling Coverage Gaps in Your Policies

While most of us are familiar with the types of insurance we need to protect ourselves, far too many of us have gaps in our coverage. Yet a single gap in property-insurance coverage could wipe out years, if not decades, of hard-earned savings. The fact that you have a policy doesn’t mean you are fully covered. With the help of your insurance agent, you must make sure that all foreseeable areas of insurance risk are covered.

Below is a list of the more common gaps in property insurance coverage. Be sure to consult with your insurance agent to get a professional opinion on how much coverage you have and how much you may need.

Umbrella liability. What  if your uninsured housepainter gets stung by a bee, falls off a ladder, and is seriously injured? Unless you’re one of the tiny percentage of people who can afford to self-insure against such an event, you need umbrella liability insurance coverage or “extended personal-liability insurance.”

Generally, this type of insurance runs $200 to $300 annually for $1 million worth of coverage. Higher limits are also available. This coverage kicks in if you’re sued and you’ve exhausted the limits on your car, home owner’s, or renter’s insurance policies. Here’s a comforting statistic: Some research estimates that as many as 94 percent of all lawsuits filed in the world are filed in the United States. Think about it: You could spend all of your money just defending against a lawsuit, not to mention paying any adverse judgment. To get umbrella insurance, you generally must carry a minimum of $250,000 of liability coverage on your auto-insurance policy and $300,000 on your home owner’s policy.

Renters. Depending on the, between 60 and 70 percent of people who lease their homes do not have renter’s insurance. These folks go without coverage at their own peril. If you’re a renter, imagine how you would be affected if you lost everything in your apartment. You may want to think twice before going without this inexpensive coverage. A policy can cost as little as $12 per month to insure up to $30,000.

Replacement cost on household possessions.
Replacement cost coverage” is a low-cost option that is added to your homeowner’s or renter’s insurance policy. This provision will replace your belongings at today’s prices and is far preferable to standard actual-cost coverage, which factors in depreciation and reimburses you for substantially less.

By the way, whether you’re a home owner or a renter, you should conduct an inventory of your household possessions, keep it up to date, and store it at your office or in a safe-deposit box. If disaster strikes, it’s much easier to recall the lost items when you have an inventory. By using the inventory, you would also receive a better insurance settlement.

Valuables. The coverage provided by your home owner’s or renter’s policy for valuables can be pitifully low. For example, you’re probably limited to $1,000 to $2,000 of coverage for all jewelry and furs. If you have jewelry, art, antiques, and collectibles, you need a rider on your home owner’s or renter’s insurance policy.

Consider this: If the burglars have any class, what are they going to take first? Answer: your most valuable possessions, of course. With a so-called “floater policy,” if your valuables are stolen, lost, or damaged, you are covered based on what it would cost to replace those items at retail. The amount of coverage for each item is based upon sales receipts and appraisals you provide to your insurance company when you obtain the extra coverage. How much you pay for coverage depends on what you are insuring, but it’s nothing compared with having to replace it on your own dime.

Safe-deposit box. Do you have a safe-deposit box at your bank? Your bank almost certainly does not insure what you keep in your box, so you may wish to consider extra coverage for the contents. It’s much cheaper to insure collectibles that are stored in a safe-deposit box, so if you’ve got valuables at home that you don’t use or display, consider putting them in your safe-deposit box. Finally, take inventory of what is stored in your box, whether valuable or not. At a minimum, an inventory will help you avoid making a trip to the bank in search of a document or something else that’s not in the box.

Hurricanes and earthquakes. If you live in an area that is hurricane- or earthquake-prone, or if you just want to be extra careful because you’re on the fringes of those zones, make certain you have added coverage for natural catastrophes. These are enormous risks that many home owners simply choose to overlook. Sure, the coverage is expensive, but that shows how much risk you’re taking by not having it.

Floods. If you live in an area prone to floods, consider getting reasonably priced federal flood insurance. Even if you live in an area where there has never had a flood, that doesn’t mean there won’t be one in the future.

All the information presented on AARP.org is for educational and resource purposes only. We suggest that you consult your financial or tax adviser with regard to your individual situation. Use of the information contained in this Web site is at the sole choice and risk of the reader.

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