
“Am I Covered?” Reviewing Your Property & Casualty Insurance
January 21, 2025
In the wake of the California wildfires, many people are now in the anxious position of hoping their insurance will cover the damages to their property.
It’s more important than ever to ensure your property and casualty insurance offers sufficient coverage, as these policies help protect your home, vehicles, and personal liability from the unexpected.
Just like you regularly review your financial plan with an advisor, it’s wise to revisit your insurance policies to ensure they align with your current needs and risks.
Here are the key things to consider when reviewing your property and casualty policy:
Does Your Policy Align With Your Current Risks and Situation?
Life changes fast, and so do the costs of goods and repairs. That’s why it’s best to assess your coverage at least twice a year, or sooner if you’ve recently purchased a home, renovated a property, or acquired something of high value. These kinds of changes can majorly impact your insurance needs.
Start by thinking about the specific risks to your assets, like…
Natural Disasters
If you’re in a flood zone, you’ll want to buy flood insurance since it’s not included in most standard homeowner policies. Fire coverage is usually part of homeowners insurance, but it’s worth double-checking your policy to be sure. We also recommend that our clients in Southern California purchase a dedicated earthquake policy, for obvious reasons.
Theft or Loss
Be sure you have appropriate endorsements for any high-value items like jewelry, art, instruments, or high-end electronics.
Personal Liability
A liability limit is the maximum amount your insurance policy will pay for damages or injuries you are legally responsible for in a covered incident. This could come into play if you’re at fault in a car accident or if someone is injured on your property and sues you for damages. Check that the liability limits on your home and auto policies align with your current situation.
Uninsured Drivers
It’s also important to check that you have uninsured motorist coverage, which protects you if you get into an accident with an uninsured driver.
Do You Have Adequate Coverage?
This is the primary question you need to ask when reviewing your policies. Here are some key things to know when assessing your coverage:
Replacement Costs vs. Market Value: There’s a big difference between these two. Market value is what your home would sell for, while replacement cost is what it would take to rebuild your home with similar materials and quality. The cost to rebuild has risen (and is likely to keep rising) thanks to inflation and material shortages, so it’s important that your policy covers full replacement costs, not just market value—especially if, like many of us in California, you’re at risk for fire damage. A replacement cost analysis can help you determine how much coverage is sufficient for your home.
Additional Living Expenses (ALE): Also called Loss of Use coverage, this ensures you have enough funds to cover temporary living arrangements, meals, and other urgent needs if your home becomes uninhabitable. Double-check your policy to make sure your ALE coverage is sufficient.
Umbrella Policy: These policies add an extra layer to your homeowners and auto insurance policies and can provide additional protection against lawsuits and other claims. This is especially useful if replacement costs or liability claims exceed the limits of your main policies.
Understanding Replacement Costs
Of course, it’s difficult to know if you have adequate coverage if you don’t know the value of your assets—or, more precisely, the cost to replace them.
Replacement costs for a home depend on things like square footage, building materials, local construction costs, and any unique features like custom cabinets or high-end appliances. There are a few ways to determine your home’s replacement cost:
Professional Appraisal: Hiring a professional can give you a clear benchmark for your home’s replacement cost. Keep in mind that building costs and inflation fluctuate, so what’s accurate this year may not be next year.
Online Tools: If a professional appraisal isn’t in the cards, online tools can give you an estimate for replacement costs. While not as precise, they’re a helpful starting point.
Once you know the general cost, you might consider the following to ensure your coverage remains sufficient over time:
Inflation Protection: Policies with inflation coverage adjust your limits as costs rise. Some extensions can add an extra 20-25% buffer for unexpected expenses.
Guaranteed Replacement Cost Coverage: This ensures your home can be rebuilt no matter what the price tag ends up being. Naturally, it comes with high premiums but might be worth considering for your peace of mind.
Other steps to protect your assets
In addition to reviewing your insurance policies, here are some other things you can do to protect your assets:
Create an emergency preparedness plan and share it with your family. Steps might include:
- Creating a “grab bag” for valuables and sentimental items (list those items beforehand)
- Identifying an evacuation route and destination
- Taking a video of your home (inside and outside) and possessions prior to evacuation—this ensures you have an up-to-date record for claims.
Create an inventory of your possessions—take photos and save receipts to an external hard drive.
Equip your home with fire-resistant roofing materials, a storm shelter (for personal safety and storage of valuables), floodproof windows, and other safety measures.
We’re Here to Help
Insurance policies and the many details within can get confusing, so it’s helpful to work with a professional. While we aren’t licensed for property and casualty insurance, we do have tools to help you review your policy, and we’re happy to refer you to a trusted agent if needed.
Either way, take time to review your policies and make sure you have adequate coverage—a few hours today could mean the difference in major relief and hefty disappointment down the road.