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Owning a home free and clear gives a sense of security and a psychological comfort, although every borrower’s situation is different and the decision should be made individually.

Should you pay off your mortgage early? (more…)

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An annual check-up on your homeowners insurance can result in a healthier policy and a healthier pocketbook.

What type of coverage do I have?

The most effective type of coverage is known as “replacement cost,” which covers, up to your policy limits, what it would take today to rebuild your house and restore your belongings, says Jerry Oshinsky, a partner at Jenner & Block in Los Angeles who has represented homeowners in litigation against insurers.

Extended” replacement cost coverage provides protection to your policy limit, say $500,000, and then perhaps another 20% of the cost after that. Percentages vary, but in this example you could recoup up to $600,000 on a $500,000 policy, assuming your losses reach that high. Extended coverage can compensate for any unanticipated expenses like spikes in construction costs between policy renewals. Now harder to find due to the industry shift toward extended replacement coverage, “full” or “guaranteed” replacement coverage covers an entire claim regardless of policy limits.

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A less attractive alternative is “actual cash value” coverage that usually takes into account depreciation, the decrease in value due to age and wear. With this type of policy, the $2,000 flat-screen TV you bought two years ago will be worth hundreds of dollars less today in the eyes of your claims adjuster. Kevin Foley, an independent insurance broker in Milltown, N.J., favors replacement cost coverage unless you can save at least 25% on the premium for going with actual cash value coverage instead.

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Even if you have replacement cost protection for your dwelling and personal property, don’t assume everything is covered. Structures other than your home on your property—such as a detached garage or swimming pool—require separate coverage. So too do luxury items like jewelry, watches, and furs if you want full replacement cost because reimbursement for those items is typically capped.

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How much coverage do I really need?

OK, now that you’re clear on what type of policy you have, you need to figure out how much policy you truly require in dollar terms. Let’s say you purchased your home five years ago and insured it for $200,000. Today, it’s worth $225,000. Simply increasing your coverage to $225,000 may nonetheless leave you underinsured. Here’s why.

The key to determining how much dwelling coverage you need isn’t the value of your home but the money you’d have to pay to rebuild it from scratch, says Carlos Aguirre, an agent for Liberty Mutual Insurance in Arlington, Texas. Call your local contractors’ or homebuilders’ association and inquire about the average per-square-foot construction cost in your area. If it’s $150 and your home is 2,000 square feet, then you should be insured for $300,000.

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There’s no rule of thumb for how much your homeowners insurance should cost. Insurers use numerous factors—age, education level, creditworthiness—to determine pricing, so the same policy could run you more than your neighbor. In recent years the average annual premium was $804. Oshinsky advises against scrimping on insurance because big increases in coverage probably cost less than you’d think. He recently purchased a liability policy that cost $250 for the first $1 million in coverage. Adding another $1 million increased his premiums only $12.50 more.

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How can I lower my premiums?

The higher your deductible, the amount you pay out of pocket before coverage kicks in, the lower your premium. Landing on the appropriate deductible level requires remembering that insurance should cover major calamities, not minor incidents, says Foley, the independent insurance broker. Most homeowners should be able to absorb modest losses like a broken window pane or a hole in the drywall without filing claims. If you can, then you’re wasting money with a $250 deductible.

Foley’s rule: If you’re a first-time homeowner and don’t have a lot of savings, moving up to a $500 deductible will probably stretch your budget. However, if you live in a ritzy home and drive an expensive car, then you should be able to afford a $1,000 deductible. In Milltown, N.J., for example, the premium for a $200,000 home with a $500 deductible would be $736, according to Foley; moving up to a $1,000 deductible drops the annual premium to $672. That’s $64 in savings.

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Every major insurer offers discounts to various groups, such as university employees or firefighters. Figure about 5%. Ask which affiliations would entitle you to a discount and how much. If an AARP membership would result in a $50 savings, pay the $16 dues and pocket the $36 difference. Many insurers also offer discounts ranging from 1% to 10% or more for installing protective devices like alarms and deadbolt locks, for going claim-free for an extended period, or for insuring both your car and your home with the same carrier.

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More about Homeowners Hazard Insurance: http://en.wikipedia.org/wiki/Home_insurance

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SOURCE: HouseLogic, REALTOR Magazine

Real Estate and Homes For Sale in Northern Virginia, Fairfax County VA, Loudoun County VA, Prince William County VA, Northern Virginia Realtors real estate agents, REALTOR Vivianne Rutkowski

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An error in CLUE insurance report can increase homeowners insurance premium or even prevent from getting coverage at all.

What is C.L.U.E.?

C.L.U.E. (Comprehensive Loss Underwriting Exchange) is a claims history database created by ChoicePoint that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy.

https://personalreports.lexisnexis.com/fact_act_claims_bundle/landing.jsp

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How to dispute report information?

If you decide to contest information about a claim, your first step is to contact LexisNexis, the owner of CLUE. You can either call the phone number listed on your CLUE report or write to P.O. Box 105292, Atlanta Ga. 30348. (The general toll-free number is 800-456-6004.) You cannot submit a dispute statement online. A-PLUS, operator of another claims-history database, follows a similar dispute procedure.

You’ll need to provide the following information to dispute a claim:

  • The CLUE reference number, which appears near the top of the report;
  • The name of the insurance company;
  • The date of the loss;
  • A brief explanation of the facts as you see them.

Once LexisNexis gets your dispute statement, it will investigate the claim and contact your insurance company, if necessary. The investigation can take up to 30 days, according to a LexisNexis spokesperson. The insurance company then has time to respond, which can take several months.

If LexisNexis’ investigation supports your assertions, it will make changes in your CLUE file. Whether it agrees or not, the company will send you a letter explaining its findings within five days after the investigation is concluded. Many insurers offer a claim-free discount. Just 5% off means $40 in savings on an average annual premium of $804.

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Setting the record straight

If you’re not satisfied with the results of the investigation, you can submit your side of the story. LexisNexis will add your statement to any future CLUE reports that include the disputed claim.

Even if the claims information in your CLUE report isn’t wrong, you may decide the report doesn’t tell the whole story. You can add comments to any entry in your CLUE report to explain the circumstances of a claim. For example, perhaps you made a claim for damage to your roof after a limb from your neighbor’s tree broke off in a storm. Since then the neighbor has cut down the tree and you’ve repaired the roof. You could attach a comment to the claim history indicating that this problem won’t reoccur.

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Look out for these common errors

What should you look for in checking your CLUE report? Of course, look for any claims that you didn’t file. You can also review the specific information about each claim for accuracy, in particular:

  • Social Security numbers. An incorrect number could mean someone else’s claims history is in your report;
  • Policy numbers. Check them against your original policy or your most recent bill;
  • Dates of claim. Since claims only remain on the report for seven years, an incorrect date could mean that the claim is listed for too long;
  • Amounts of claim. Be sure that these amounts agree with any payments you received.

If you haven’t owned your home for seven years, you might also want to contact the previous owners to verify that any claims they filed are stated correctly in the report. If you got a copy of LexisNexis’ Home Seller’s Disclosure Report from the sellers when you purchased your home, you might also want to compare that report with the “Claims History for Risk” section of the current CLUE report. This part of the CLUE report lists recent claims related to your home, not just those you filed. One catch is that the Home Seller’s report, which shows the claims history of a property without divulging personal information about the sellers, only goes back five years.

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For ANSWERS to Frequently Asked QUESTIONS About C.L.U.E.: http://oci.wi.gov/pub_list/pi-207.htm

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SOURCE: LexisNexis, HouseLogic

Real Estate and Homes For Sale in Northern Virginia, Fairfax County VA, Loudoun County VA, Prince William County VA, Northern Virginia Realtors real estate agents, REALTOR Vivianne Rutkowski

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