When purchasing a home, homebuyers are required to obtain adequate homeowners insurance before their mortgage can be approved. Homeowners insurance premiums are a major expense to homeowners. The monthly payments may seem intangible, but when disaster strikes, like the Northern California wildfires, homeowners insurance could be the best thing a homeowner could buy.
More than a month has passed since a series of wildfires killed at least 43 people and destroyed about 8,900 homes and buildings in the Napa and Sonoma areas. Victims of the fires are dealing with the loss of their homes. California's insurance commissioner says homeowners who lost their homes have up to 24 months to collect insurance payments.
Filing a home insurance claim, especially if it involves total loss, is a tedious process. At a recent meeting of the Silicon Valley Association of Realtors in Los Gatos, State Farm insurance agent Laura Peterson, an affiliate member of the local trade association, mentioned some important measures homeowners can take that can make the process go more smoothly.
Peterson stressed good communication is important between homeowners and their local insurance agent. She suggested homeowners review the limits of their policy and the value of their possessions annually with their agent.
Homeowners should understand the deductible, which is the amount of loss paid by the policyholder. "Higher deductibles lower your premium, but increase the amount you must pay out of your own pocket if a covered loss occurs," said Peterson.
If you live in a disaster-prone area, like a flood plain or near a fire-prone forest or in an area prone to earthquakes, your insurance policy may have a separate deductible for certain kinds of damage.
Don't confuse what you paid for your house with rebuilding costs. Peterson said homeowners should understand the difference between market value and replacement cost. She explained market value is the amount a buyer would pay for a home, including the land. Replacement cost is the cost necessary to repair or replace the home.
You want your policy to cover major purchases or additions to your home. A home inventory can be as simple as a list of items or a visual record. Peterson said an effective home inventory should include both. Make a list of items, take photos or a video recording of contents of your home for added security.
"A good way to start is to move from room to room, listing items as you go. Keep a copy in a safe location away from your home," suggested Peterson.
Peterson added it can save valuable time during an emergency if families make, discuss and practice an evacuation plan in case they need to flee their home in an emergency. Keep vital documents and elements like medications, key financial information, and irreplaceable items like paper photos, family heirlooms in an evacuation package.
"An evacuation package should be in one place and ready to go in minutes and everyone should know where it is," said Peterson.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.