Is Your Home Fully Insured?

As your house's value rises, your insurance coverage should, too

It's easy to forget about homeowner's insurance - until you hear of a fire, robbery or some other major problem. You don't ever want to discover that you're underinsured in such a situation, particularly if it's because you forgot to increase your insurance to reflect the appreciated value of your home and possessions. To fully protect yourself, be sure to review your policy every two years or so, and whenever you make significant renovations to your home. Here's what you should keep in mind:

Stay current: As you review your policy, think about the type of coverage you have and want. Typically, a home's contents are insured for up to one-half of the policy's face value. An actual cash-value policy would recoup the replacement cost minus depreciation. Replacement coverage might be better - it covers the cost of rebuilding your home and replacing your possessions at current prices, up to the policy limit.

Get an appraisal: Consult a builder, a Realtor or a professional appraiser to determine the value of your home rather than attempting to do it yourself. It's a good idea to get a reappraisal every few years; building costs tend to rise, especially in a strong real estate market.

Natural disasters are different: Homeowners' policies in Canada do not offer flood coverage. As for earthquakes, if you live in an area at risk, discuss special coverage with your insurance agent.

Don't be liable: Many homeowners' policies provide about $100,000 in coverage for liability. This covers the cost of someone suing you if they are injured on your premises or if you cause injury to someone outside your home. Keep in mind that this coverage is subject to limitations and exclusions. For example, you are not covered if you cause injury while driving or if you are violating the law. Fortunately, liability coverage is inexpensive. You may be able to get an umbrella policy that covers losses exceeding both your homeowners and auto policies.

Remember your apartment: While your landlord's or condo association's insurance should cover damage to the building's structure, you need insurance to cover your personal belongings. Again, you'd be well served to consider replacement-value rather than cash-value coverage. And make sure your policy includes liability insurance.

Failing to review your insurance coverage can prove to be an unexpectedly costly oversight. Keep yourself on a biannual schedule. That way, you'll safeguard your current lifestyle and future financial security at the same time.