A Great Many Lessons By Jeff LaBonte, Triplet Dad Originally printed in July, 2006 This month’s installment is not really just a Dad’s Perspective, but is an important subject nonetheless. Many of you know that my family went through a fire event about 18-months ago when our house was destroyed in an early morning blaze. There are a great many lessons in our story that I believe others would benefit from reading. The two most important things that we took away from this event are better preparedness and knowing about your insurance coverage. This month, I will focus on the insurance part. Even though it may be a boring read, it is something you should review and act upon immediately. We were incredibly lucky that we had very good insurance coverage in place, though we did not know it at the time. Hopefully, after reading this, you will make sure that you have the elements in place to protect your family financially. Next month, I will talk more about being prepared – and not the stuff you hear on Smokey the Bear commercials or during your child’s fire awareness week at school. I am talking about the real things you deal with in the face of an emergency. My advice for now is to just get everyone out; everything in your house is just stuff. Which brings me to insurance. I have some homework for you all. Your task for this month is to call your insurance agent and review your homeowners’ policy. Make sure you have an appropriate level of coverage, ask your agent about any items you own that that should perhaps be itemized on a rider (jewelry, musical instruments, art, expensive electronics), and make sure you have “guaranteed replacement coverage” on your dwelling and contents. I am sure every insurance company operates a little differently, but the process should be similar to ours. There are several components to your policy that you may or may not be aware of; I wasn’t. You have your building coverage; your contents (personal belongings) coverage; additional living expenses coverage; demolition coverage in the event of a total loss such as ours; code upgrade coverage; and outbuildings coverage (garages, sheds etc.). We used most of these, so I can shed a little light on what they mean. It is important you contact your insurance agent or company as soon as possible after a loss to get the process rolling. If you have a total loss, expect a long process. Our fire was November 8 2004, we moved back to our house almost exactly one year later, and we received our final insurance check in May of this year. That is a full 18-months from beginning to end, if you’re counting. Our adjuster was out the morning of the fire and had us an advance check to get back on our feet within a couple hours. One thing you should know about the insurance adjuster is that he or she works for the insurance company, not for you. This is not necessarily good or bad – ours was fine – but keep it in mind. You will need to find a builder right away. We chose one that specialized in insurance losses. They knew the insurance system, did all the negotiation with our insurance adjuster and then built the house. The builder did not charge us for negotiating the settlement. The benefit to us was that it was in both ours and the builder’s best interest to get a higher settlement. You also have to itemize every item in your house that you wish to claim that you lost due to fire, water, smoke and heat damage. Some people will hire a public adjuster who will do all of this legwork for you, negotiate a settlement, then keep anywhere from 5-10% of the total settlement. We did not choose this option; our builder did the building part of the claim and we did the contents ourselves. First and foremost, make sure that you have guaranteed replacement coverage on your house and contents. I really don’t know if this is standard, but if you don’t have it, get it if you can. What this means is that your insurance company will cover the cost to restore your house to the same quality and condition it was in prior to your loss, and to replace all of your belongings with new stuff, even if the cost exceeds the stated policy amount. The actual amount the insurance company will pay you is determined through negotiation before your claim is finalized. If you have certain items such as artwork, jewelry, or musical instruments, or if you work out of your home and have expensive professional equipment that you use in your job, you will probably need riders. Riders list specific pieces, often with appraisals required, so that you are assured of reimbursement on those items. You may also need a separate policy for your business if you work from home. Most of us have read at one time or another how important it is to have a video tape or pictures of your belongings to have as proof for your insurance claim should something happen. Again, not all companies work the same, but I was never asked for proof of anything, and the videos we had were utterly useless. The insurance adjuster spent hours going though our burned-out house and making notes of what was there. But much of the house was so utterly destroyed, there was no evidence. You would never have known there were ever clothes in our closet; just a few melted plastic hangers remained. The insurance company took our word for it. This is hard work. We spent hours with about 10 volunteers going through the house ourselves and inventorying everything. Every pen, every pad of paper, every storage bin, every piece of clothing we could recall. The trouble with the video tapes is that we tape all the big stuff – TVs, couches, stereos, paintings, etc. You aren’t going to forget about that stuff. What you will struggle with is how many spoons you had in the kitchen drawer. If you are going to use this video or picture method, make sure you open every drawer and cabinet, go through the attic and basement and video everything in your house… everything. We then priced every item on our inventory list by going to stores and using the internet to find current replacement prices. This process took us about 4 months, plus a month for the adjuster to review the list. Another component of your insurance is called additional living expenses. This covers your expenses related to the loss of use of your home, such as a hotel room, rental or a trailer on your property while you rebuild. It can also cover various other expenses, but check your policy and review with your insurance agent to ensure you have adequate coverage here. The last two components are demolition costs and code upgrades. In our case, these were a percentage of our building coverage excluding the guaranteed replacement portion. Demolition comes into play in a total loss, and is a percentage. Ours was 5% of the building policy. We were actually a bit underinsured in this area, but not by a great deal. We also tapped into the code upgrade part of our policy, which allows for additional money to be paid to comply with current building code during the repair or rebuild. If you have an older home, this can be a big deal so make sure your policy provides enough of an extension for this possibility. Our house was only 14-years old; still, we did end up using some of this money. You can see that by being underinsured on your house, even with guaranteed replacement, you could run into trouble rebuilding in a total loss. No one likes to deal with insurance, and certainly no one wants to think about dealing with a major loss like fire or flood. But I can attest to the peace of mind that comes with knowing you are adequately covered. There will be enough emotional distress during a crisis like this; you don’t need a financial crisis on top of it all. Reviewing your policy will take a phone call, then maybe an hour or two of your time. You may end up paying a few hundred dollars more for your insurance premiums. But consider this: after adding up our costs of rebuilding, renting a house for a year, replacing belongings, and repairing both of our vehicles (both cars were damaged in the fire as well, one extensively), renting a van while ours was repaired, then moving all our new stuff from the rental house to our rebuilt house, we had insurance claims of almost $650,000. A few hundred bucks a year is small potatoes in comparison.