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Making sure you have adequate insurance

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Insurance is one of those things you don't need until you need it. But by then, it's often too late if you aren't adequately protected.

Mortgage companies require a basic homeowner policy. And because insurance protects the underlying collateral for your mortgage, lenders can even go so far as to foreclose if you refuse to carry insurance.

But there are all kinds of other coverage over and above your standard homeowner policy that you also may want to consider.

"There are lots of things people don't think about until after the fact," says Chad Mirock, a product manager at Travelers in Hartford, Conn.

Here's a rundown of some of the major types of coverage to consider:

* Flood. Homes in areas with a high risk of flooding -- that is, areas that have a 1% or greater chance of flooding in any given year, which translates into a 26% chance of flooding during the life of a 30-year mortgage -- must be covered by flood insurance if their loans are insured by Uncle Sam or purchased by either Fannie Mae or Freddie Mac. These days, that's roughly 3 of 4 mortgages.

But it can flood anywhere it rains. In fact, 25% of all flood claims occur in moderate- to low-risk flood areas where coverage is optional. And just a few inches of water can lead to thousands of dollars in damages. That's why flooding -- not just from storms but from clogged drainage systems or broken levees -- is the nation's No. 1 natural disaster, according to the Federal Emergency Management Agency.

Flood insurance of up to $250,000 can be purchased through the National Flood Insurance Program. It is relatively inexpensive, and coverage includes damage to your dwelling and its contents. Property protection and cleanup reimbursement, including sandbagging to prevent damage and removal of mud and debris after the fact, is also covered.

Contact your agent for more information. But don't wait until a hurricane is imminent or the dam is about to break. There is a 30-day waiting period for coverage to go into effect.

* Umbrella. "You don't have to be a millionaire to be sued like one," Mirock says. If you find yourself on the wrong end of a legal battle, your homeowner, automobile or watercraft policies may not be enough to cover whatever an unsympathetic judge or jury might award.

Thus the need for umbrella coverage, designed to supplement the basic liability coverage as limited by your other policies. Depending on the insurance company, an umbrella policy can provide an extra $1 million to $5 million in protection, which kicks in when the liability portion of your other coverage has been exhausted.

* Valuables. For the most part, jewelry, furs and the like can be covered with an endorsement, sometimes called a rider, that is added to your basic homeowner policy. But Travelers' Mirock notes that most basic policies have limits on not only the type of loss that is covered but also the dollar amount of losses. So if the value of your possessions exceeds those ceilings, consider valuable-items coverage or a personal-articles floater.

Items that may require additional protection include artwork, musical instruments, sporting equipment such as golf clubs or a high-end racing bicycle, stamps, coins, firearms, silverware, cameras and computers.

* Business. If you make your living from a home office, consider business coverage for both your equipment and your transactions.

If you rely exclusively on your homeowner policy, you may not be covered if your business property is stolen, your house burns to the ground or a delivery person trips on your front stoop. Consequently, it's wise to explain to your agent what kind of business you operate, the number of employees and the amount of inventory you carry.

* Empty house. If you leave your home vacant -- say, you buy another place and move before you sell the old house -- your homeowner policy will lapse after a certain period (typically 90 days), even if it is paid in full. Let your insurance agent know, and find out what kind of coverage is available.

* Renters. If you rent out your house, you are no longer eligible for homeowner coverage. Now you are a landlord, so you will need landlord's coverage, which protects your property against damage and you from legal and personal liability.

The landlord's rental policy from MetLife covers the building, other structures such as a garage or shed, and any personal property such as furniture and appliances provided for your tenants' use.

lsichelman@aol.com

Distributed by United Feature Syndicate.

Copyright © 2014, Los Angeles Times
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