Is Your Castle Truly Protected?

Your home is your castle, and it's important to protect its value and comfort. Many people unknowingly underinsure their property because they don't fully understand their homeowner's insurance coverage. The transition between the end of the year and the new year is an ideal time to review your insurance needs with a trusted professional. Here's essential information to consider before doing so.

For Any Homeowner

Homeowners' policies typically don't cover damage from natural disasters such as floods, landslides, sinkholes, and earthquakes. You can obtain flood insurance through the National Flood Insurance Program or a private insurer. Additional insurance is also recommended if you live in an earthquake-prone area or are at risk of landslides or sinkholes.

For High-Net-Worth Individuals

First, make sure your property is covered for 100% of the replacement value of your residence and all outbuildings on the property, such as a guest house, hobby studio, greenhouse, pool house, stable, and so on. This coverage should automatically increase annually to reflect inflation in your home's value. Also, carry damage and liability insurance for any pool on your property and coverage for any animals stabled.

Expensive jewelry, collections such as art, cars, and antiques, and costly hobby equipment (for cars, woodworking, and other crafts) generally require additional coverage. To insure these items for full value, you should have jewelry and collections professionally appraised and keep purchase receipts for all items. A personal property endorsement or floater to supplement your homeowners' insurance is needed for adequate protection. Rates vary among insurers.

Home Offices and Equipment

Standard homeowners' insurance is unlikely to provide adequate coverage for your home office or other business-related activities. According to the Insurance Information Institute, a typical homeowners' policy provides only about $2,500 in coverage for business equipment. In addition, such policies often provide no liability coverage for business-related activities, including client meetings.

If you operate a home office or run a small business from home, you'll need insurance that fills coverage gaps in your standard policy. For professionals who maintain a secondary home office—contractors, attorneys, accountants, real estate agents, writers/editors, and bookkeepers—consider adding a permitted incidental occupancies rider to your homeowner's policy. If you have a primary home office, you'll need to upgrade to a home business endorsement. This endorsement covers various home-based business activities while falling short of a more costly full business policy.