So you've redone the kitchen, added a deck or, maybe, put in a home entertainment center. Finally, your renovation work is finished.
But are you really done? Have you updated your insurance policy?
For More Information
Some useful Web sites on homeowners insurance:
• www.mdinsurance.state.md.us from the Maryland Insurance Administration. Click on "Consumer Information" for a consumer's guide and a comparison guide of rates in 10 different Zip codes in the state.
• www.state.va.us/scc/division/boi from the Virginia Bureau of Insurance, a division of the Virginia State Corporation Commission. Click on "Consumer," then under "How can we help you?", click "Want one of our publications?" for a guide to homeowners/renters insurance.
• www.disr.washingtondc.gov from the D.C. Department of Insurance, Securities and Banking. Click on "Insurance Industry" for consumer information.
• www.iii.orgfrom the Insurance Information Institute. Click on the left side on "home." The site also has information in Spanish.
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How to Keep Premiums Low
The Insurance Information Institute and the Consumer Federation of America offer these suggestions on how to keep premiums low:
• Shop around. Check at least three to five reputable companies for comparable coverage. "People can save $100 on average if they spend an hour" shopping around, said J. Robert Hunter of the Consumer Federation. The savings are based on focus groups.
• Make sure your credit report is accurate . In most states, insurance companies can use your credit score to deny coverage, set rates or offer discounts. Maryland bans the use of credit scores in denying insurance.
• Increase the deductible. If the deductible is increased from $250 to $1,000, you could save at least 25 percent in annual premiums.
• Ask companies if you will get a discount if you buy auto and life insurance from them, too. But check both the combined costs of the premiums and the costs of individual products from different companies.
• Add security devices, sprinkler systems and fire alarms. Insurers offer discounts for such items.
• Check whether your insurer charges more if you have a dog or a particular breed of dog. Because dog bites now account for almost a quarter of all homeowners insurance liability claims -- about $345.5 million annually -- some insurers are clamping down. Some require dog owners to sign liability waivers for dog bites, while others charge more for owners of breeds such as pit bulls and Rottweilers. Others won't write insurance for dog owners at all.)
Here are the three most important questions to ask your agent, said Carolyn Gorman, vice president of the Insurance Information Institute:
• If my house is destroyed, do I have enough insurance to rebuild it?
• If my house is destroyed, do I have enough insurance to replace my personal property?
• Do I have enough insurance to protect my assets if I'm sued?
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According to consulting firm Marshall & Swift/Boeckh, which tracks home construction costs for many insurers, most homeowners are underinsured. That means that if a disaster occurs, the policy would not provide enough coverage to pay for fully rebuilding the house.
The Wisconsin company says that last year about 64 percent of policyholders were underinsured by an average 27 percent of what they would have to pay for complete reconstruction after a disaster.
That's an improvement, though. Before 2001, about 73 percent of policyholders were underinsured by an average 35 percent.
The company's spokesmen and others say many insurers have taken steps in recent years to pin down more accurately the value of the homes they cover.
Nationwide, for example, since 2001 has required a home visit for new policyholders. The nation's fourth-largest home insurer then "attempts to physically inspect the house every three to five years," Nationwide spokesman Kevin Craiglow said.
"We think it's good for the policyholder -- to help provide the appropriate coverage at a fair price -- and good for the insurer because we need to understand the exposure that we're being asked to insure," Craiglow said.
Insurers in the past seven years have also shifted more responsibility to homeowners to figure out their home's value by limiting what had been considered traditional standard coverage. Most insurers used to pay full replacement value in the event a house was destroyed. That means they would pay the bill no matter how high it went.
Now, all but a few companies offer standard policies that will pay only for the estimated value of the house or that cap payments at 20 to 25 percent more than the estimated value.
The estimated value is set by the insurance companies with computer models or software programs, such as those sold by Marshall & Swift/Boeckh. The value includes details about your particular house -- such as the building materials used, the number of rooms and the cost of your furnishings and other contents -- that you provide to the agent when you get the policy.
If policyholders want full replacement coverage, they can still get it from most companies, but they have to pay more.
It's not clear, though, whether policyholders have been paying attention to how important they are in the process now, and how critical it is that they routinely reassess their property's value.
Some insurers are sending special reminder letters with renewal notices about the importance of reassessing value.
