Gannett News Service

Is your homeowners' insurance keeping up with the increase in your home's value?

The declarations page on the policy tells you how much it will pay for your house and its contents. But did you add in the master bedroom and bath you built last summer? Or your new computer system or home entertainment center? Would the policy pay enough to rebuild your house if it were flattened by a tornado or destroyed by fire?

The cost of rebuilding is the amount to use these days when figuring how much insurance to buy, because what you paid or what you could sell for might not cover the "extras" you've got in your house, said Loretta Worters, spokeswoman for the Insurance Information Institute, a New York-based trade group.

You can check that figure yourself the size of your house in square feet multiplied by the per-square-foot amount of local building costs. Or you can talk to your insurance agent or a local appraiser.

Many policies now have an automatic escalator that increases the amount of coverage based on any increase in values in your area. If yours doesn't, make sure you review it every year or so.

In deciding how much coverage you need, "deduct the value of the land and foundation from the property's market value to determine the maximum policy limit," the National Insurance Consumer Organization advises in its brochure, "Buyer's Guide to Insurance."

It is also a good idea to shop around policy vs. policy every two or three years to make sure you're getting a competitive deal.

Comparison shop

Take your policy from agent to agent to make sure you're getting quotes for the same coverage. Another company's rates might look better, but check it out before you switch, said Ken Hollman, professor of insurance at Middle Tennessee State University in Murfreesboro, Tenn.

The A.M. Best Co. guide, available in public libraries, will show how it ranks against other companies, and your state insurance department's complaints division will let you know whether it has more or fewer complaints than the competition.

"If they've hassled previous policy holders, it'll be reflected in those complaints," he said.

If your house is insured for $200,000, the contents usually are covered for half that, or $100,000. You can increase that total to, say, 75 percent, but you can't drop it any lower than 40 percent.

If you have expensive jewelry, silver and electronic equipment, you may need extra coverage.

Riders, also called floaters or endorsements, are policy add-ons that provide coverage beyond the $200-$2,500 limits outlined in the base policy. But be aware, Hollman warned, once you purchase a rider, you lose the "base" coverage for that item.

Your need for extra coverage may hit suddenly, said Paul W. Schiel Jr., agent with Wade & Egbert Insurance Co.

"You may have inherited your mother's silver and she may have had her mother's silver," he said. "It's a big thing with baby boomers who are starting to inherit assets, valuable items like jewelry that they need to add to their policy."

Pay or replace

If you bought a sofa four or five years ago for $1,500, carrying replacement value could mean a check for $1,500 or $2,000 if the sofa were destroyed. But if it were covered by actual cash value insurance, you'd only get $1,000 or less, Worters said.

"You need to have replacement cost coverage," Hollman said.

The best way to know what it would cost to replace everything in your house is to make an inventory of your belongings everything in your house. "It's not a bad idea to photograph every corner, every side of every room in the house," Hollman said. "Take a picture of things in the closets you can't rely on your memory after a loss occurs."

The easiest thing is to get a video camera andstart scanning rooms, opening cabinets and closets and talking about what you're shooting. You can do a similar service with a still camera and a tape recorder, he said. Store the tape or pictures in your safe deposit box, and update it by adding sales receipts whenever you make a purchase.

"When an insurance company has credible evidence that these items existed, there's little way they could deny it," he said.

Look for discounts

Shopping for coverage also means shopping for discounts getting a break for insuring your house and car with the same company.

Other breaks are available for safety systems, people older than 55 and retired, households where nobody smokes, and use of fire-retardant building materials in the house. This varies from company to company, so ask your agent what's available.

Your policy will provide liability coverage, but you can get additional coverage fairly cheaply with an umbrella policy. Usually issued in a $1 million chunk, the umbrella literally takes up where your homeowner's liability coverage leaves off. Your homeowner's policy would cover, say, the first $500,000, then the umbrella would pick up the balance.

"It's protection for people who are concerned about being sued; they find it a little soothing to the pocketbook," Worters said.

A policy costs $100-$200 a year, which Hollman calls relatively cheap when compared to what consumers pay for the underlying auto and homeowner policies.

"If you're one of those unfortunate few who have a suit filed against you and they win an award, if can be financially ruinous against you," he said.

Where to learn more

Where to learn more about home insurance:

• Two brochures, "Insurance for Your House and Personal Possessions. Deciding How Much You Need" and "Settling Insurance Claims After a Disaster," are available free from the Insurance Information Institute by sending a self-addressed, stamped envelope to the III at 110 William Street, New York, N.Y. 10038.
• For general questions about all types of insurance, the industry funds a toll-free telephone line, The National Insurance Consumer Helpline, (800) 942-4242, open 7 a.m. to 7 p.m.
• The A.M. Best Co. guide, available in public libraries, ranks insurance companies.
• Your state insurance department should be able to advise whether a specific company has more or fewer complaints than competitors.

Homeowner's Insurance Checklist

• Do You Want...
  1. Coverage that keeps up with inflation? You'll have to ask your agent for an inflation guard endorsement.
  2. The lowest possible cost? You can get lower premiums by taking a higher deductible, the amount you'd pay out of your pocket before insurance kicks in. Raising your deductible from $250 to $1,000 typically will reduce your premium by 15 percent. But make sure you can handle the higher out-of-pocket expense if an accident occurs.
  3. Replacement cost coverage? This means the insurance company will pay what it costs to buy a new television, for example, instead of what your old television was worth. It may be part of the policy or you may need an endorsement.
  4. Extra liability insurance? An umbrella policy will provide an extra layer of coverage on top of your homeowner's or auto policy, to protect you if you're sued.
  5. Earthquake protection? This coverage will cost extra and carry a higher deductible, but if you don't have it, you're out of luck if your house is damaged by earth movement.
  6. Flood protection? That means a separate policy.