In all our preparations for major natural disasters, we have discussed food, water and generators in some detail. The one big area that we have missed is insurance. I know if the government collapses or the economy fails, insurance won’t be there. But in situations like hurricanes Sandy and Katrina, earthquakes and floods it can sure help.
Your basis preps and state of mind will help you survive the initial disaster, but rebuilding is always a problem. This is where good insurance can help. Because of my past employment in both fire and law enforcement I have seen firsthand the difference a good insurance policy can make.
Like I said in an earlier blog location is important, know that if you live in a low-lying area you are taking a chance, have good flood insurance. Now I am not saying go crazy and buy every policy in sight, but make sure you have the coverage you need.
When buying homeowners or renters insurance there are two types, Actual cash value and full replacement value. Unless your policy specifically states otherwise most homeowners policies only cover the contents for actual cash value.
This means that when you file a homeowners claim for contents, the insurance company determines how much to pay you by finding the cost to replace your property with new property of the same kind and quality. But here’s where the problem starts: If your policy covers your personal property (your home’s contents) for its actual cash value, the insurance company deducts depreciation from your personal property’s overall value before arriving at a figure to pay you. This means that your ten-year-old TV which still works great is worth next to nothing. You are only being paid what your property is worth on the market not what it costs to replace it.
Your check will usually be less, than the amount you will have to pay to repair or replace your property. However, if you have replacement cost coverage, the insurance company will pay what it costs to repair or replace your damaged possessions at current prices without deducting for depreciation.
While actual cash value language is standard, most insurance companies offer replacement cost coverage as an option.
Remember, that if you are renting, the home or apartments owners insurance does not cover your property. A tenants insurance package is not overly expensive. In my experience, the less you can afford insurance the more you need it. This is just another step towards being self-reliant.