Are You Properly Insuring Your Home?

6 Steps to Be Sure

By Kitty Werner

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How much money do you need to set aside to cover a loss? It depends on the size of your deductible (the

amount of money you need to pay before your insurance kicks in). Deductibles can be as low as zero or well over $1,000. As a general rule, the higher the deductible, the lower your insurance premium; because the insurance company doesn't have to pay lots of small claims, it saves money.

And a fair warning: Too many little claims on a low- or no-deductible insurance policy can flag it for cancellation. Figure if your claim is really worth the aggravation before you file it if you have this type of policy.

The contents of your house are insured as part of your homeowners' insurance. Depending on your policy, they are insured for 50 to 75 percent of the value of your structure. In other words, if your house and its attached structures are worth $100,000, your contents are insured for $50,000 to $75,000. Is that enough?

The value of your worldly possessions is calculated in two ways: actual cash value or replacement cost. An actual cash value means the value of your computer, TV, couch or silverware at the time of your loss. If you have a three-year-old refrigerator that cost $800 new, its actual cash value at the time of loss may be only $300, which is what you will get. Replacement cost, on the other hand, means you receive the amount of money it takes to replace that same refrigerator today.

This can't be stressed enough: If you need to file a claim for loss or damage, how will you prove what you owned? Take the time to photograph and record the value of your possessions.

This takes time but you only need to do it once, and the trouble it can save you in the future is incalculable. Fill your still or video camera with film or get extra memory cards for the digital variety and take a picture of all your possessions. Then make a list of them, detailing their costs at purchase and gathering any receipts you have. Take all of this information and store it somewhere not in your house such as a bank safety deposit box. If trouble strikes, you won't have to recall the exact value of your credenza while you're reeling from its loss.

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