Collins: How to make sure you have adequate homeowners insurance

For the last couple years, access to homeowners insurance has been a problem.

Many carriers have left the state for various reasons, such as huge payouts from natural disasters and the regulatory climate. It’s made purchasing a home even more difficult, and now we are seeing existing homeowners having their insurance carriers deny them for renewal. There is much debate happening in Sacramento on the best way to address these issues. Still, the recent wildfire events in Southern California are not going to help the situation. For some insurance carriers, it could be the last straw, forcing them to pull out of the state.

So, what can you do to ensure adequate coverage for your home in the event of a catastrophe?

First off, now is a good time to reach out to your insurance professional and review your policy. I reached out to one of the most knowledgeable insurance professionals that I know for this column, Michelle Lin, insurance broker for Red Wave Insurance Services.

Lin recommends you let your insurance agent know about all the upgrades you have done. Many firms use the Marshall & Swift system to determine rebuild value. However, if you expect them to replace a luxury kitchen or custom bathroom, they need to know about those remodels.

It’s also not a bad idea to consult with a local contractor on typical rebuilding costs in the area. The rebuilding cost of your home is not the same as the market value of your home. Many times, homeowners forget to let their insurance agents know about renovations done on the property, which leads them to be underinsured. Some updates could even lead to better premiums — such as newer roofs.

Another policy detail you want to keep an eye on is the “loss of use” portion of your policy, which can cover some living costs when your residence is uninhabitable. It covers temporary housing, such as a hotel or apartment, moving costs, extra food and restaurant bills, storage units, etc. This coverage doesn’t pay for your mortgage, as you are still obligated to your lender to keep making your payments.

Lin also recommends meeting with your insurance agent annually to review your coverage. Keep the receipts of all your high-value purchases and store them on a cloud server. Lay out all your valuable jewelry and take a photo. Lin offers to take a room-by-room video for her clients, because when disaster hits it is easy to forget what to claim.

If you own a condo or townhouse, you have an additional step. You need to review your covenant, condition and restriction, also known as CC&R, to know what your homeowners association is responsible for. In addition, take proactive steps like trimming overhanging trees and removing debris next to the home. Main insurance carriers are now using satellite imaging to determine the risk factor of insuring properties.

San José Spotlight columnist Neil Collins is CEO of the Santa Clara County Association of Realtors, a trade association representing more than 6,000 real estate professionals in Santa Clara County and surrounding areas. Contact Neil at [email protected].