Alberto, Beryl, Chris, Debby, Ernesto, Francine – The alternative rock genre tells us to “batten down the hatches” and they are spot on this year. Hurricane season runs from about August 20th through about October 10th and while this year’s season started out earlier than previous years, it has decided to spread out its resources and head towards the finish line with a bang (or three tropical whooshes, as the case may be today). Whether it’s rain, wind, or storm surge, now is probably a good time to talk about homeowner’s insurance.

While your homeowner’s policy has several sections, our main areas of concern are the coverage details, as well as any exclusions, and any modifications to the policy. Your coverage details: Let’s start with your dwelling, the place where you lay your head at night. Are you insured based on the value of your home, the cost to replace your home, or the extended replacement cost? These are very different numbers. If you are insured for the value of your home (the least expensive and generally the lowest level of coverage) – is that the assessed value or something closer to current value? Essentially, that’s the size of the check you are going to get, regardless of whether or not that would even remotely cover the cost of rebuilding your house back to the way it was. Now, if you were thinking of moving from a two-story to a ranch, it might cover the cost of building a completely different home but burning down your house to get a new one isn’t really a solid strategy. If you would like to rebuild back to the way things were before the storm/fire/catastrophe, you probably want an extended replacement policy.

What’s in your home, also known as “personal property,” is the next part of your coverage. Most policies provide coverage based on a formula related to the level of dwelling coverage, which may or may not, replace what you have inside your house. If you recently remodeled your kitchen with fancy new appliances, you might be putting bargain basement appliances back in if you didn’t update your coverage. I can tell you that the books in my living room have their own coverage to be sure they could be replaced since my standard policy wouldn’t come close. We’ve talked about this before – take a moment this weekend to walk around your house and look at what you have. Then look at what your coverage might replace. Then decide what you wouldn’t replace because you won’t have the money to do so. Do you have coverage to pay for someplace to lay your head if you aren’t bedding down in your own home? If so, for how long? I know several of you out there are experiencing home projects that are stretching into months (dare I say years) which would mean paying rent and storage fees during that time if you were rebuilding.

Does your policy help offset the costs of rebuilding your identity if that gets stolen? Nothing can replace the time you’ll need to spend and this type of coverage won’t pay for the balances run up on your cards, but it will help offset the legal fees and the cost to replace your identification as well as any resolution services that are needed to restore your identity and credit standing.

Let’s move on to the modifications to your policy such as the age of your home, do you have an alarm system, and have you bundled your policies. There are all sorts of modifications (one insurance company has built an entire commercial series on being claim free) and each one provides you with a small credit against your premium. Given that the cost of homeowner’s insurance is going to do nothing but go up, taking advantage of any available modifications makes good financial sense.

What’s our take-away here? Well, if you have a second home in a hurricane prone part of the country, I would probably start looking for a second job to cover your premium (if you can get coverage at all) and/or the cost to rebuild that property if your policy excludes “acts of God” (which I always thought was a pretty malleable phrase). If you wait to see if any of these tropical storms develop further, it’s a little late to realize that the coverage you put in place doesn’t cover natural disasters (which is more common than not in coastal area or areas subject to flooding, fires, and avalanches). For something a little closer to home, it might surprise you to know that many policies don’t cover damage to your basement if your sump pump fails to pump. For those of you with built out basements, that could be problematic, not to mention expensive.

If you haven’t shopped out your homeowner’s insurance in the last three years, put that on your To Do list for the coming quarter. Have an in depth conversation with your agent and make sure you have a policy in place that covers what it needs to cover. It would be way better to examine and understand your coverage now than have something happen and find out the hard way that you need to pay out of pocket for the damage.

On to a logistical note. I will be traveling away from these Atlantic issues for a fall sabbatical, which will have me out of the office from September 23rd to November 4th. Staff will be monitoring messages, and I have a few classic blog posts planned during my absence.