When was the last time you reviewed your insurance coverage?
Insurance is necessary for almost everyone. There are many types of coverage, but for the purpose of this article I will only bring your attention to home insurance. Home insurance includes building, contents, personal and excess /umbrella liability coverage. Off the top of your head, do you know how much coverage you have for your home? When was the last time you sat down with an insurance agent/broker to review your coverage? I know from experience that people sometimes hate having the discussion about insurance, because they feel that no matter what, their insurance agent will tell them they don't have enough coverage. But you know what . . . he or she is probably right!
When it comes to insuring your properties, both here and abroad, there are a couple of items to consider. First and most importantly, will you be receiving an adequate cash settlement in the event of total loss? If you lose your home in a disaster, it is crucial to have the flexibility to re-build to your own specifications and not to that of the insurance company. Another point to consider is will you have the option to choose your own contractor or will one be mandated to you? Most people would not be comfortable having a contractor chosen by the insurance company to rebuild their home. I encourage people to use better and more flexible insurance companies.
When you have home insurance, you also want to distinguish coverage between the building and contents. Your building (i.e. house) will have value and all the belongings inside will have value too. But do you really know how much everything is worth or rather how much it would cost to replace it? A lot of us like buying items on sale - especially when we see those premium brands on special - who can resist right? In the unfortunate event of a fire, you'll have to replace everything all at once and at current prices. Oh! And don't forget to consider tax and delivery. Now do you think you have enough coverage? There are limits to coverage for jewelry, fine art and silverware, unless they are specifically listed in your insurance plan.
Another aspect of home insurance most of us forget about is liability insurance. Just to clarify, this type of insurance protects from the risks of liabilities, such as large damage claims or costly lawsuits. So if someone gets injured on your property, you could be held liable for compensation, especially if you have a high net worth. Umbrella liability insurance can add additional protection outside your home. It can provide protection if liability claims arise against you and your dependants. So ask yourself these questions:
- Do you entertain regularly?
- Do you have a domestic worker?
- Do you have children who go to boarding school or university?
- Are you an officer or member of a board?
These are only a few questions, but the purpose here is to get you thinking about how much exposure you have to this type of risk and what possible problems could arise as you might need to increase the amount of coverage you have. Overall, making a habit of regularly reviewing your home insurance coverage could end up saving you a bundle down the road in the event of an unexpected fire, flood or liability claim.
Lori Pinkowski is a senior portfolio manager and senior vice-president, Private Client Group, at Raymond James Ltd., a member of the Canadian Investor Protection Fund. This is for informational purposes only and does not necessarily reflect the opinions of Raymond James. Securities-related products and services are offered through Raymond James Ltd., member of the Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member. Lori can answer any questions at 604-915-LORI or [email protected]. Listen to her every Monday morning on CKNW at 8:40 a.m.
