Volume 3 Number 24
June 12, 2006

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Most Americans -- approximately three quarters -- insure their homes and personal possessions against fire, theft and other damages, according to a recent National Association of Insurance Commissioners (NAIC) consumer survey. However, there's one notable exception: young singles. Only 34 percent of Americans who own a home or rent an apartment at this life stage have homeowners or renters insurance.

Homeowners insurance covers a home's physical structure and the owner's personal property. In contrast, renters insurance only protects personal property. Everyone -- homeowners and renters -- benefits from liability coverage, which provides financial protection in case others are injured while visiting their homes.

Understanding options with regard to homeowners/renters insurance is the first step in making sure you get the right type and amount of coverage to fit your individual needs.

Many consumers are not aware that they have the option to insure their home and belongings for either the replacement cost or the actual cash value. Actual cash value is the amount it would take to repair a home or replace damaged possessions after factoring in depreciation. Replacement cost is the amount it would take to repair a home with materials of similar kind and quality, or to purchase new possessions without deducting for depreciation. Understandably, insuring property to cover replacement costs is more expensive than insuring it for its actual cash value, but may be worth the difference if a consumer can afford the higher premiums.

To facilitate in filing a claim, make an inventory of personal belongings and save receipts for major items, along with a photograph or video of each room. This documentation should be stored in a safe place outside the home, such as a safe deposit box, in case the dwelling is destroyed.

As many consumers learned from last year's violent hurricane season, damage to a home or belongings caused by flooding is NOT typically included in a homeowners policy. Consumers who live in areas prone to flooding should inquire about flood insurance through the federal government's National Flood Insurance Program (NFIP).

People who own expensive valuables like jewelry, antiques or art may want to purchase an endorsement to their homeowners policy, as these types of valuables are typically not covered by basic policies.

Many factors that affect insurance costs are within the control of consumers. Shop around and compare the costs of comparable coverage from different insurers to get the best value.

Install smoke detectors in key locations; keep fire extinguishers handy, especially in the kitchen.  Install dead-bolt locks and a burglar alarm system, particularly one that directly contacts the police or fire department or an external monitoring service.

If you can absorb the higher out-of-pocket expenses in the event of a loss, select a policy with a higher deductible (the amount not reimbursed by your insurance) as the higher the deductible, the lower the premium.

Consolidate homeowners and auto policies with the same insurer to qualify for a multi-policy discount.

Young singles, who typically rent rather than own and may have one or more unrelated roommates, should know that each leaseholder needs his/her own individual renters policy to protect his/her own possessions and against liability for accidents that happen on their premises.

Young families who may be buying their first home should know that in most instances it only makes sense to insure their home itself and belongings-not the land on which the home sits. Also if they install a swing set or trampoline for their kids, they should consider additional umbrella liability insurance to cover them in the event a visiting child is injured while on their property.

Established families that may be remodeling or building an addition to their home should update their homeowner's policy to reflect these enhancements, particularly if they add $5,000 or more to the value of their home.

Seniors should ask if they are eligible for discounts.

When a mortgage is paid off and the homeowners insurance was previously paid through the mortgage company, owners need to alert the insurance company to send the premium bills directly to the owner and to pay the bill on time so that the homeowner's policy doesn't lapse.

All consumers need to protect themselves from being scammed by fake insurance companies selling bogus insurance policies. Consumers need to take a few minutes to stop, call the consumer helpline and confirm that a company is legitimate and authorized to sell insurance in Florida before purchasing insurance.

For more useful information about insurance, consumers can visit the NAIC's new consumer education web site, Insure U Online, at http://www.insureuonline.org/. The Florida Department of Financial Services' Verify Before You Buy website offers information on a variety of financial topics to help consumers with these important decisions. http://www.MyFloridaCFO.com/verifybeforeyoubuy/