Life is full of "what-ifs"!  What if your neighbor’s dying tree crashes through your roof; your newly remodeled basement floods; your grandmother’s priceless Oriental rug gets doused with a bottle of Bordeaux; or a child is injured while playing in your swimming pool? Would you be covered?

If you don’t know what your property and casualty insurance covers, find out – and soon! You don’t want any surprises. And just because you have a policy doesn’t mean you have adequate coverage.

What is Property and Casualty Insurance?

Like it or not, insurance is essential to protect you from a wide variety of potentially unforeseen or unexpected losses. Property and casualty insurance provides coverage against unexpected loss to your property and personal belongings, and for your personal liability.

The “property” portion covers most risks of damage or theft to your insured property. The “casualty” piece provides protection against losses resulting from bodily injury or property damage sustained by others, for which you or family members may be liable.

Am I Covered for That?

Do you know what your homeowners insurance covers? A recent Journal of Financial Planning survey indicates that many homeowners are ill-informed.

According to a survey conducted by the National Association of Insurance Commissioners, one- third of homeowners believe flood damage is covered by their standard policy. Over half think their policy covers them in the event of a water line break. Thirty-five percent anticipate they’ll be compensated for an earthquake, and almost as many think mold is covered. How accurate are their assumptions?

Almost all policies provide fire, wind, hail, lightning, and explosion protection, but damage caused by earthquakes, floods, mold, nuclear incidents, terrorism, and acts of war are generally excluded. However, additional coverage from earthquake, flood, mold, water and sewer backup and many other losses may be available either by an add-on to your existing policy or through an additional policy, such as a flood insurance.

As you can see, it’s important to understand what your policy actually covers.

So Who Has to Pay?

Flooded Basement?  If your finished basement floods and you don’t want to watch movies on a raft, who pays? If you have flood insurance or water/sewer back-up coverage, your remodel is on the insurance company. If not, it’s on you!

Downed Tree?  Who pays if severe wind causes your neighbor’s tree to crash into your house? Your insurance pays the claim, because the tree damaged your property. 

Earthquake?  Who pays if earthquake tremors from Indiana’s New Madrid fault line crack the foundation of your home? Did you add earthquake coverage? Insurance will only pay for the loss if you have an earthquake endorsement.

Grandmother’s Rug?  What if a priceless Oriental rug given to you by your grandmother gets damaged or your jewelry is stolen? All insurance policies provide some level of personal property coverage; however, coverage may be capped by both the cause of loss and the amount per item. For example, your jewelry limit might be $1,000, but it may not include mysterious disappearance. To get reimbursed for the replacement cost of your $10,000 ring, you’ll need to discuss a personal articles floater with your insurance professional.

In all situations, you’ll also need to satisfy the insurance deductible prior to receiving payment from the insurance company. Sometimes that can be steep! For example, the deductible for earthquake insurance can be as high as 10 percent of your home’s value.

Am I Liable for That?

What happens if the damage is to someone else? Say, someone slips and falls on your pool deck. Thousands of people go to the emergency room each year with pool-related injuries. In this scenario, you could potentially incur medical or legal expenses from the incident. Liability protection is typically a standard component of your homeowners’ policy. However, a pool can increase your liability risk, so you should consider increasing your coverage.

Do I Need Additional Protection?

A personal umbrella policy is an additional layer of protection that can keep liability judgment suits from depleting your personal assets. A policy pays if the liability exceeds the limits of either your homeowners’ or auto insurance. It’s an important addition to your overall insurance coverage – especially for individuals at risk for becoming targets of liability suits when an accident occurs that involves their property or vehicles.

Summary

Do you have the "what-if’s" covered? To find out, talk with your insurance professional. You’ll rest easier knowing you have the appropriate property and casualty insurance for your current needs. Don’t put it off!  Now’s the time to stop wondering about the "what-ifs."

Meredith Carbrey, CFP, is a Senior Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Meredith at mcarbrey@bedelfinancial.com.

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