Homeowner’s insurance can be lifeline in a disaster

By: Gloria Young, Journal Staff Writer
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When dozens of homes and businesses went up in flames on Aug. 30 in North Auburn, among the first phone calls were to insurance agents. At the State Farm office on Highway 49, agency owner Ralph Smith said 11 of his clients had homes that burned to the ground. Multiple others reported structural or property damage. One of his first concerns was finding another place for them to stay. “It’s what we call additional living expenses,” Smith said Tuesday. “Our clients had checks that night. We were writing checks at the evacuation center.” In fact, when homeowners shop for insurance, living expenses in the event of a catastrophe are an important part of the coverage. “They need to confirm how long that living expense will be good for, because it varies,” Smith said. Typically it will be for 12 or 24 months. With a total loss, 12 months is awfully quick to clear debris, design a new house, build it and fill it with personal property, he said. At State Farm, policies typically cover two years, he said. A common mistake insurance agents see is that a new addition to the family is not included in the policy — it could be a mother moving in or an adult child returning home, said Cindy Eklund, owner of Eklund Insurance in Auburn and a Farmers Insurance representative. “Now that person is not named on the policy and you don’t have coverage for their personal belongings and living expenses,” Eklund said. “Make sure everyone is covered on that policy.” Another thing to consider is the cost of replacing personal belongings. Know the difference between actual cash value and replacement cost. “Actual cash value is a depreciated value,” Smith said. “(For example), if you bought a couch 20 years ago for $500, to replace that same couch might cost $2,500. An actual cash value policy would take the original cost, look at the life of the couch and apply a minimal value to it. The replacement cost would pay the full value to replace it.” In some cases, particularly technology, the replacement cost could be less. “You might have spent $5,000 on a plasma TV five years ago, but you can replace it today for $1,500,” he said. The value of a home and belongings changes over time, so it is a good idea to review the policy with your insurance company from time to time. Eklund recommends a yearly review. Changes such as buying new furniture or building an addition are factors. “The cost of reconstruction goes up most of the time,” she said. “Very seldom does it go down.” Once tragedy has struck, determining what has actually been lost can be a daunting task. Eklund suggests videotaping or photographing everything in the home. “When a claims officer comes in, it is the client’s responsibility to provide a list of what’s there,” she said. Smith said omitting items is a problem he sees frequently. “I remember when I was an agent in the Murphys area and we had the Gulch Fire,” he said. “I had one client whose home burned to the ground. (Some month after his home was rebuilt), at Christmas time, he called back to say he’d forgotten to include his Christmas ornaments in the claim.” A videocamera is particularly useful for taking an inventory, because you have voice capability, allowing you to describe what is in a closet or storage container. Once you’ve made the recording, store it at a separate location with a relative or in a safe deposit box. And, when it comes time to buy replacements for lost items, keep duplicate receipts. “In case an adjuster loses something, there’ll be a backup,” Eklund said. Keep in mind that expensive items such as jewelry, silver and art likely will need coverage beyond what is offered in the basic policy. A rider can easily be added to provide the extra coverage. The Journal’s Gloria Young can be reached at