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When two of the nation's most powerful groups -- dog owners and insurance companies -- recently collided in the state of Washington it was the insurance industry that won, defeating legislation that would have prevented it from establishing higher rates for homeowners with big dogs and dangerous breeds.

Welcome to the new era of homeowner insurance, a time when insurance companies are trying to limit claims, increase exclusions and raise premiums -- all with some reason.

The National Association of Realtors says that "in the past few years, insurers have experienced a surge in the number and size of property casualty claims from a variety of causes. The property-casualty insurance industry posted a $7.9 billion net loss in 2001, its first-ever net loss."

"The decline of the stock market took (a) toll on insurance companies' investment portfolios," says NAR. "During the 1990s, insurance companies competed with one another by using premium pricing; record stock gains made up for losses in premiums. Investments have dried up, and loss of that revenue means premiums must increase."

According to the Insurance Information Institute premiums are increasing: Average policy costs for homeowners rose 8 percent in 2002 and such price hikes are not finished. The Institute also expects that premium costs will increase another 9 percent this year.

There isn't much homeowners can do about declining stock values, but there are ways to get the best possible rates and coverage at the least cost.

Get Enough Coverage

You want sufficient coverage to replace the property in the event of disaster, but how much is enough can be tricky. For instance, new building codes may require different systems and standards than those in place when the property was constructed.

Alternatively, you don't want too much coverage. For example, it's usually held that land is not insurable because it cannot be damaged -- if a house burns down the property is still there. The bottom line is that you want enough coverage so that improvements on the property can be replaced at today's prices and with today's technologies.

Beware of Inflation

Inflation reduces the spending power of cash. Many insurance policies have an "inflation guard" feature so that coverage automatically increases each year with the rate of inflation. However, given that local home prices often rise more than the rate of inflation, it's wise to check policy coverage at least annually.

Don't Push The Limits

It's a common practice for drivers not to make small claims for auto insurance when they have a minor ding or dent. The same theory may well apply to insurance: even small claims require paperwork and payments. Think of insurance as disaster relief and avoid small claims.

Use Care In The Animal Kingdom

Several years ago while at the pound with the children looking for a dog we spotted an especially large, robust creature which, said the cage notice, "eats livestock." Insurance companies, fairly or unfairly, are backing away from coverage which involves certain species and breeds. You can pretty much figure that any animal which is poisonous, endangered, illegal to import (think of certain parrots), huge, dangerous or capable of downing a heifer will raise coverage questions.

Prepare For Disaster Repairs

It routinely happens that after a hurricane, earthquake or other local disaster repair costs rise substantially above going rates. One solution is something called "extended replacement cost coverage" which will increase allowable repair payments by as much as 20 percent.

Personal Stuff

Homeowners insurance not only provides protection in the case of fire and theft, but also the loss of personal goods. Coverage often equals 50 percent or more of the policy's face value, but there are cautions when it comes to personal goods. In one case, a home dated back to the 1700s -- and so did the furnishings. The tables, chairs, art and other items were worth substantially more than the home, a serious insurance issue since such items cannot be replaced.

  • Is the policy's personal property coverage sufficient? If you have art, jewelry, historic items, expensive furnishings, etc. then check with your insurance broker to obtain full and complete coverage. Ask about "cash value" coverage and "replacement cost" policies as well as special coverage for high-priced items -- so-called "floaters" or "endorsements."
  • How do you appraise items with sentimental value? What's invaluable to you may not have much cash value for insurance purposes.
  • How do you know what's covered? It's a good idea to make a video record of each room in the house, collections, silverware, art, and other valued items. Place the video in a safety deposit box. In the event of a claim you then have a visual record and inventory.

What About Tenants?

In the same way that you need property insurance for your home you also need it for rental properties. As a condition of the lease many landlords require tenants to obtain renter's coverage. If there's a problem at the property, the tenant then has insurance protection -- and less reason to make a claim against the property owner.

In a similar manner, ask insurance brokers about coverage if you have a boarder. Can you get liability coverage? Are you protected if the rent stops because of a disaster?

Living Expenses

If you do have a fire or other disaster you still have to live somewhere. Does your policy pay for living expenses after a catastrophe? If yes, how much?

Liability Coverage

If someone trips and falls in your front yard -- or claims they did -- you may well face a court suit. The good news is that homeowners coverage provides liability protection. Specifics regarding coverage and legal fees can vary, however, and you may want additional coverage.

Surprising Goodies

Have a home office? Protection may be included in your policy -- but it may be limited in which case an additional endorsement can be desirable. Have a child in college? See if your policy covers lost or stolen property for college students living in dorms. Do clients and customers visit your home-based business? If yes, check about coverage.

Premium Payments

When homes are financed lenders often take on the duty of collecting monthly insurance costs, holding them in "escrow" or trust accounts, and then paying your policy as bills come due. This is fine, but it makes sense to check annual mortgage account statements to assure that such payments have been made -- otherwise you may not have coverage.

As always, it pays to sit down with your insurance broker to specifically find out what's covered, what isn't, what can be covered better and where costs can be reduced.

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