transcript

Let's review our Homeowners Insurance policy together.

This is something that I do review during the planning process and at Annual Reviews, but it's towards the end of the meeting. Sometimes we're tired and kind of rushing to wrap things up. I really wanted to be able to go through it in detail with you in this 2-part series. So grab your homeowner's insurance policy and let's get started.

Start by looking at the deductible amount.

This is the amount that you need to pay out of pocket before coverage kicks in. The default is typically something like $1,000. You may consider increasing that to $2,500 or $5,000 if you're in a good cash situation. If you have a higher deductible, your premium or your annual cost may be lower. So it's just a trade off.

Different damages may have different deductible amounts.

We had what was categorized as wind damage in our house and we got a $300 check from the insurance company versus thousands of dollars, which we were expecting, because we had a much higher deductible for wind damage. So make sure that you do review that so there's no surprises there.

You also have the option to do a percentage deductible.

Instead of it being a flat amount, like $2,500, it might be a 2% deductible. The way you calculate that dollar amount is 2% times the home's insured value. So 2% x $400,000, for example, is $8,000 per year. That's a high deductible. But I'm seeing higher deductibles, at least in California. The insurance market here is not pretty. People are being dropped with their coverage. They're unable to have their policies renewed. This is with no explanation or weird explanations. So I am seeing higher deductibles. This could be part of it, but I mention this because some people are having luck keeping their policy by choosing something higher. So if your cash flow supports that, it may be something that you look into.

Next, let's look at Coverage A - Dwelling Protection.

This is going to help you pay to repair or rebuild your home if it's damaged due to a covered hazard. So we're seeking replacement cost here, not market value. Take the Dwelling A amount divided by the square footage of your home, and that's going to tell you your coverage per square foot. So compare that to the construction costs per square foot in your area, which is something that your homeowner's insurance company or broker should be able to help you verify or come up with. I used to have an online tool where I logged into my insurance company, and they provided something along those lines which was helpful. They don't offer that anymore, but your company may do that. So when you log in, see if there's something available there.

Make sure that if you have recently remodeled and added square footage, you increase your Coverage A amount.

That is something, a mistake that I'll find fairly often, where people do the remodel, they add the square footage, they don't think or don't remember to increase that in their homeowner's insurance so that they have the appropriate coverage.

And then you also want to make sure that you've elected extended replacement coverage, which is a default for me, but I don't know that it is for everyone.

Let's review the rest in another video. I will see you there. My name is Linda Rogers, Owner of Planning Within Reach.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.