Smart homeowners assess insurance needs

By Kimberly Lankford
Special to The Washington Post
Saturday, April 3, 2010

Homeowners in the Washington area are relatively lucky when it comes to homeowners insurance. The average cost of coverage is less than $700 a year in Maryland and Virginia, well below the national average, and slightly more than $1,000 annually in the District. And locals have plenty of coverage options -- even people with waterfront property can choose from several insurers.

With drifting cherry blossoms the harbingers of spring storms, and the start of hurricane season June 1, it is a good time to review your homeowners policy to make sure you're protected from the weather, especially since there's a 30-day waiting period before flood coverage takes effect.

One of the biggest mistakes people make is to base their home's insurance value on its market value. The numbers are totally different. You need enough insurance to pay to rebuild your home if it is destroyed, which can be a lot less than its market value -- especially in the D.C. area, where land is so expensive. You can't reduce your insurance coverage just because your home's market value has decreased, either.

"Construction costs and labor rates have not gone down," said Arthur Slade of the D.C. Department of Insurance, Securities and Banking.

Insurers used to pay whatever it cost to rebuild your home, but now most limit coverage to 120 to 130 percent of the insured value. When you take out a policy, insurers will ask a lot of questions, or send an agent or appraiser to your home to calculate the coverage amount. But it's up to you to change your limits if you make major home improvements.

It can cost less than $50 a year to boost your coverage by tens of thousands of dollars, if you need it. You can get a report with your home's replacement cost estimate for $7.95 at, which accesses the same building-cost database that insurers use.

Fill coverage gaps

Most homeowners insurance policies exclude a few key risks that could mean thousands of dollars in expenses if you need to file a claim. Most insurers no longer cover sewage backups in their standard policies, which can be a surprisingly common and expensive claim. But you can add $10,000 to $20,000 in sewage backup coverage for about $50 a year, which pays for damage and cleanup if a sewage line backs up or a sump pump stops working and water pours into your home.

Building ordinance coverage can be valuable for older homes. An insurance policy generally pays to replace your home as it is but doesn't cover the additional costs to make the house comply with new building codes, unless you have this coverage.

Make sure your policy provides "replacement coverage" for your furniture and other possessions rather than "actual cash value" coverage, which only pays for the depreciated, thrift-shop cost of the old stuff.

Most policies also limit coverage for jewelry, antiques, silver, artwork and collections (paying only $1,500 for all of your jewelry, for example). But you can usually add extra coverage for about $10 per $1,000 in coverage for jewelry and $1.50 per $1,000 for other valuables, said Bill Howard, an independent agent in Alexandria.

Consider flood coverage

Ordinary homeowners policies typically cover damage that comes from the top down -- such as rain and wind damage -- but exclude damage from rising water and flooding. This became a big issue after Hurricane Isabel in 2003, when many claims were denied as flood damage.

You can buy flood insurance through the National Flood Insurance Program. This is a good time to take action; there's a 30-day waiting period before flood coverage takes effect.

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