Having lived through all the problems that come with a flooded basement, I know firsthand the importance of making sure to have the right types of homeowner’s insurance coverage. Here are some of the essentials.
If you have a basement, see if sewer and drain backup coverage is available. If so, sign up. This is different than flood insurance. Fortunately, we chose to have this coverage. In fact, in reviewing our policy several years ago before our basement flooded, I found out that our coverage totaled just $2,500 and did not cover furniture. We increased this to $5,000 and ended up needing every bit of that.
During that same policy review, I asked about flood insurance and was encouraged to weigh the cost (about $400 per year) against the likelihood of a flood in our area. You can assess the risk of a flood in your area at FloodSmart.gov (look for the “One-Step Flood Risk Profile”).
Here are some other items to check.
- Is our home properly valued? For about $8, you can estimate the replacement cost of your home at AccuCoverage.
- Do we have inflation guard? This adjusts the value of your home as the cost of building materials rise.
- Do we have building ordinance or law coverage? This covers any added costs of rebuilding associated with new building codes.
- How much living expense coverage do we have? Find out how long your policy will pay your living expenses if damage to your home would leave you living elsewhere while repairs are made.
- Are we covered for the replacement cost of our possessions? This covers the full value of what it would cost to replace your possessions, as opposed to cash value, which factors in depreciation.
- Do we even know what we’ve got? If you lost all that you own, would you know what you lost? The Insurance Information Institute offers an excellent free online program, Know Your Stuff, designed to help you take inventory.
- Do we have proper riders? If you have any pricey jewelry or expensive electronic gear, check to see if it is fully covered under your standard policy or whether a rider may be needed.
It’s also a good idea to use a video camera to create a visual record of what you own. Just walk through your home, capturing all of your stuff and describing it along with your estimated value as you go. Update your inventory at least every five years.
Another lesson we’ve learned is that when storing anything in the basement, use shelves so you do not store anything directly on the floor. And store your items in plastic containers, not cardboard boxes.
And one final point: think twice before stepping into a flooded basement. As the water spread throughout our basement, I called a neighbor who’s far handier than I am and he told me if the water is below the electrical outlets, it’s “probably” safe. I risked it, walking through the water to switch off our fuse box until the water drained out of our basement, and I’m still around to write about it. However, all of the advice I’ve read since then says not to set foot in a basement that has taken on water. Instead, you’re supposed to get your electric company to turn off the power from the outside of your house.
Have you learned any lessons about homeowner’s insurance or storm season preparedness that could benefit others?
By Matt Bell
Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.