Friday, November 16, 2012

Yay! I'm underinsured

Ahem. . .  I finally have some stuff to talk about.

I bought my homeowner's co-op policy right after I closed on my co-op eleven years ago.  At the time, I did a cursory comparison shop and then grabbed the cheapest standard co-op policy I could find, just so I could move in knowing that I had coverage.  Going back and reviewing my policy has been on my to-do list for a long time, but it always seems like I'm too swamped to do it properly when renewal time comes around.  As a result, I always end up renewing the standard policy and pushing the review to next year's to-do list.

A year and a half ago, the sensor on my washing machine that tells the machine to stop filling conked out while I was running a load.  The washer was quiet, so I didn't realize that anything was awry until my neighbor's dog ran into my bedroom and came back soaking wet.

There was a hell of a mess to clean up, but I was extraordinarily lucky that my floors weren't ruined.  While I was in the middle of the cleanup, though, I found out that the water was also pouring into the elevator shaft and running over the control panel.  The super took a break from fighting the water to tell me that any lasting repercussions, up to and including an elevator replacement, would be on my dime.

THAT was almost enough to make my heart stop.

Thankfully, the control panel dried out without any damage.  Again, I was extraordinarily lucky.

You would think that would be enough to motivate me to review my policy and adjust it as necessary, BUT NO.  I just carried on without doing anything.

Fast forward to October last year.

I came home after an evening out to a street full of sirens, flashing lights, firetrucks, and neighbors running out of the building in bare feet. It turned out that my neighbors a few doors down the hall had experienced an electrical fire caused by a plugged-in appliance while no one was home.   I actually got a photo of a huge backdraft shooting out of a window after a couple of firemen kicked it in.

As you might expect, my neighbors' apartment was completely gutted and uninhabitable.  The building lobby was destroyed by both fire and water, and the damage ended less than five feet from my door.  My apartment stunk for a couple of weeks, but there was no lasting damage.  Once again, I was extraordinarily lucky.

For the next eight months, walking through the lobby looked like walking through first a war zone, and then a  major construction site.  The neighbors had their apartment rebuilt at the same time and only recently moved back in.

You would think that would be enough to motivate me to review my policy and adjust it as necessary, BUT NO.  I just carried on without doing anything.

That's horribly irresponsible, right?  I'm not normally like that (if anything, I'm a little overly conscientious about anything that impacts my bottom line or risk factors that could affect it) but for some reason I just didn't want to sit down and go over my homeowner's insurance.  The long-lasting impact of the fire and the horrific renovation costs both within the apartment where the fire started and in the lobby have stayed with me, though.  This year, when my renewal came through, I sat down to review my policy thoroughly.  A few of the numbers I saw scared me:

Building property protection:  Covered up to $4,700  
Wow.  I am seriously underinsured here.  That's not going to cover a lot of damage if I have a fire!

Personal property protection:  Covered up to $47,000  
I don't have a lot of valuables, so that's actually more than I need.  As it turns out, though, dropping coverage below $45,500  in this area will convert my policy from replacement value to actual cash value across the board.  In other words, if something bad happens, everything that's covered by this policy will only be covered at the 2001 value because that's when I bought my apartment.   That's not smart, so I'm leaving this one as is.

Additional living expenses:  Up to 12 months
No change needed here.

Family liability protection:  $300,000 each occurrence  
My building wants $1,000,000 coverage, so I'm short here as well.

Guest medical protection:  $1000 each person  
It's low, but I don't have a lot of risk factors.  I'm okay with this.

Loss Assessments:  $1000 each occurrence  
I didn't even know what this is.  It covers individual shareholder assessments, which are temporary costs assessed by the building above and beyond standard maintenance costs.  My building is quite good about avoiding assessments, so I think it's fine to leave this one as is.

I called my insurer to run through a few scenarios and found out that upping my building property protection to $150,000 and my liability to $1,000,000 will nearly double my base costs.  I already have the highest deductible available ($1000) and all applicable discounts from having a doorman and smoke/carbon monoxide detectors, so there's no way to bring that number down any further.  I also called around to other insurers to see if anyone else would be more competitive.  To my surprise, my current insurer offered the most competitive rates across the board, even compared to policies in which I could bring my deductible up to $5,000 or $10,000.

I called my insurer back and made the applicable changes, effective on the date of my policy renewal.  I'm screwed if a fire breaks out between now and mid-December, but after that I'll be sleeping a lot better.

Do you have renter's or homeowner's insurance?  If not, why not?  If so, do you feel that you're adequately covered, or do you plan to make changes on your next renewal?

3 retorts:

Penny in Australia,  November 19, 2012 at 1:10 AM  

Wow, the American insurance system is totally different to Australia in home insurance too! (Differences between our health insurance systems are well known!).

In my complex (10 units) the building insurance is paid jointly (ie we all pay 10%). This covers all structural things, including in any common areas (ie driveways/gardens). Contents insurance (what's actually inside your home) is paid by each owner individually, if they want.

I don't feel my household belongings are valuable enough to insure, as the premiums over 10 years or so would be close to the replacement cost. I've lived here for 10 years now, so basically if anything breaks/blows up etc, I think I'll still come out ahead financially.

goldsmith,  November 23, 2012 at 6:49 AM  

Hi FZ! Hi Penny!

Penny, my situation is similar to yours, in that I pay for the building insurance of my through my management fees. I would have to check, though, what it is with liability that emanates from one's own apartment (i.e. FZ's washing machine scenario). I also have home contents insurance, to the value of 50,000 Euro (64,000 USD by today's exchange rate). Replacing your *entire* moveable possessions after a fire or so can be desperately expensive. The greatest saving I achieved was actually taking my bicycle off that policy, once I had saved up the replacement value.

Bonnie,  November 26, 2012 at 2:17 PM  

FZ! I don't own a home yet, but I just wanted to say "hi". Hope to hear about what's going on with your mom, boyfriend, etc., soon. :)

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