Over the years, paying for your homeowner’s insurance becomes habit. But according to the experts at AARP, this mindlessly continuing this routine can be a costly mistake.
Our insurance needs change as we get closer to retirement. You may find that you’ve scaled back on many things – including the content of your home. Because of this, pre-retirement is an ideal time to look at your homeowner’s insurance coverage to make sure your policy protects the assets you’ve worked hard to accumulate and that your money isn’t being wasted on insuring items you no longer own.
What does your homeowners insurance cover?
Ask homeowners what is and is not covered by their insurance policy, and many won’t have a clue. Ask yourself these basic questions:
- Are you absolutely sure about what is covered and what is excluded in your policy?
- Does your policy cover you for burglary and acts of God?
- How much will the insurance company give you in cash, and how long will it take them to pay?
If you don’t know the answers to these basic questions, dig out your policy and do a little detective work and number crunching. Ask your insurance agent to run an official analysis on what it would cost to rebuild your home.
By the time you get to retirement, you have a lot of stuff!
The next step is to inventory the contents of your home. This is a time-consuming process; you don’t have to tackle it all at once! Do one room at a time, and be thorough. Take video, and narrate the scene as you film.
Take close-up photos of anything of significant value, and write a description of the item on the back of the photo. The more information you note, the better. Include each item’s condition, how much you paid for it, and where and when you purchased it. If the item has a name and model number, make note of that, too.
Be especially mindful of expensive items like art, jewelry, and antiques. Once your inventory is complete, make a copy of it and place it off site, such as in a safe deposit box or with one of your adult children. You now have a good idea of the value of your home’s contents.
Remember that most homeowner’s insurance policies cover the contents of your home only up to a certain amount. You may need a separate insurance schedule for any items of significant value.
Deciding on a deductible
How much of a deductible can you afford now that you’re on a fixed income? If disaster strikes, could you pay out of pocket to cover the current deductible? This is especially important for retirees who need to weigh their cash assets against the savings that may be realized by choosing a policy with a higher deductible.
Last, consider the liability coverage on your home and make sure it is enough to protect your assets.
When you retire, let your insurance agent know. He or she can help you determine whether you are eligible for any discounts – and whether there are other discounts you don’t know about. For example, did you know that you might be able to get lower premiums be installing burglar alarms, sprinkler systems, smoke detectors, and dead bolt locks? Sometimes insuring your car with the same company can result in a discount, too.
Experts say retirees should revisit their homeowner’s insurance each year, especially if you downsize your home or buy or sell any of its contents. Doing so will help you avoid letting it slip through the cracks while you focus on your health insurance needs.
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