Homeowners Policy Review - Part 2 of 2 [video]
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Next up, we're going to look at Coverage B - Other Structures.
We talked about the Dwelling Protection, which is the structure you live in and all attached structures. But if you have an unattached structure, like a garage or a shed, that's going to be covered in this Coverage B. Make sure the default looks okay. Look at the amount, especially if you've recently made a change. We bought a house that had no garage. Over the course of a few months, we built a garage with a loft. We needed to go back and make sure that we increased that amount to protect our investment.
Next, let's review your Non-Covered Hazards.
Typical examples of these are earthquake and flood. You want to see if you want to get a separate policy for anything that you're at risk for. For my clients in California, across the board, I do recommend they obtain earthquake insurance. For clients nationally, clearly I don't know where every fault line is, so I do look at an earthquake hazard map to see where fault lines are. I've been surprised to find clients in certain parts of Tennessee or South Carolina that are actually on a fault line or very, very close in a high risk area. So just presenting them with the risk and then letting them decide if they want to get a separate policy for that. My insurance company also, when I log in, shows me the risk for things like flood and earthquake for each property. You may find something similar when you log in or check with your insurance provider if you're not sure of your risk.
Personal Liability Coverage
So this gives you financial protection if someone is injured on your property due to your negligence. This is the main thing it covers. There's a lot of nuances and there's exclusions so you want to be super clear, especially if you have high risk things like a pool, a dog, a trampoline - being crystal clear on what is covered and what's not. When you get a new policy, there's a lot of checklists, and I feel like they do a really thorough job making sure that you have the appropriate coverage. But it's when you add things after having a policy in place, things can get missed. Like you later got a dog, you later got a pool. So make sure that you are adding things as needed.
For the amount of liability protection that you should get, you want to look at your net worth, so your assets minus liabilities. See that amount and get coverage equal to that. That's a broad definition, though. That's just saying, what do you stand to lose in a lawsuit, but you may want to also consider your future earning potential. For example, if I have a young doctor that doesn't necessarily have a large net worth but a big earning potential down the road, I'm going to increase more coverage than just the net worth. The most you can typically obtain is $500K for this. If you need more, then I'm going to recommend an umbrella policy that will sit on top of that. So your home liability coverage will kick in first, and then if you need more, the umbrella will come in next.
Let me know what else you want to deep dive into for next time. My name is Linda Rogers, Owner of Planning Within Reach.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.