Just The Minimum Please
I see a lot of clients looking to get home insurance and when I ask them how much they want to insure for, they always say, "we only want the minimum, we don't have a lot of stuff".
It's interesting when people say that because all they're focused on is how much it would cost them to buy the insurance. They never really think about how much it would really cost to replace what they own.
Home insurance policies are normally set up to insure you for "replacement cost". This means that they'll get you back to where you were before the loss, never more, never less. So if your neighbor upstairs had a water leak and your 55" 4K Ultra HD TV that you bought for $2,500 3 years ago short circuits because of that, the insurance company will replace the TV with the same brand, size and model without depreciation. They're not going to say that it's 3 years old now, here's $500 to replace it. People don't realize this so they underestimate the value of what they have all the time.
Let me give you some example. Let's say there's a fire in your apartment and it was a total loss and you have to replace everything. Here's what it would cost for someone who doesn't have a lot of stuff.
As you can see, the contents of a typical two bedroom apartment could easily add up to $30,000. We haven't even considered if someone has a hobby like photography or stamp collections.
We recently had a claim for water damage and the floors in the apartment had to be replaced. No contents were damaged, but before they can redo the whole floor, all the items in the house had to be packed and put in storage. The cost of the storage, cleanup and packing of the contents alone costs almost $15,000.
So before saying you just want the minimum coverage, discuss with your insurance advisor how much coverage you really need.
It's interesting when people say that because all they're focused on is how much it would cost them to buy the insurance. They never really think about how much it would really cost to replace what they own.
Home insurance policies are normally set up to insure you for "replacement cost". This means that they'll get you back to where you were before the loss, never more, never less. So if your neighbor upstairs had a water leak and your 55" 4K Ultra HD TV that you bought for $2,500 3 years ago short circuits because of that, the insurance company will replace the TV with the same brand, size and model without depreciation. They're not going to say that it's 3 years old now, here's $500 to replace it. People don't realize this so they underestimate the value of what they have all the time.
Let me give you some example. Let's say there's a fire in your apartment and it was a total loss and you have to replace everything. Here's what it would cost for someone who doesn't have a lot of stuff.
| TV, DVD Player, stereo | $1,800 |
| Kitchen/dining room furniture | $3,000 |
| Living room furniture | $4,000 |
| Bedroom furniture | $5,000 |
| Linens | $750 |
| Clothing | $8,000 |
| Medicine cabinet contents | $250 |
| Pots and pans | $150 |
| Small appliances | $500 |
| Dishes | $400 |
| Sporting equipment | $1,000 |
| CD, books | $800 |
| Toys | $500 |
| Total | $26,150 |
As you can see, the contents of a typical two bedroom apartment could easily add up to $30,000. We haven't even considered if someone has a hobby like photography or stamp collections.
We recently had a claim for water damage and the floors in the apartment had to be replaced. No contents were damaged, but before they can redo the whole floor, all the items in the house had to be packed and put in storage. The cost of the storage, cleanup and packing of the contents alone costs almost $15,000.
So before saying you just want the minimum coverage, discuss with your insurance advisor how much coverage you really need.
Comments
Post a Comment