First, I am a licensed insurance agent. I prefer not to mention the companies I represent. However, laws differ from state to state. This article is to educate people how to use their insurance to replace their prepping supplies and retreats when disaster strikes.
There are some basic terms to know when dealing with insurance. I’ve defined some of these terms into every day language:
Actual Cash Value– This is also known as the depreciated value. Think about your roof. If you have 20-year shingles that have been on your house for 11 years and have a hail storm strike your home, here is how it is settled. If the cost to replace your roof is $10,000, the insurance company says you have nine years remaining on the shingles (20 year shingles less the 11 years they have been on your house) and they multiply $10,000 by 9/20 of the remaining value of your roof. So, the value of your roof is $4,500. They pay you this amount ($4,500), less your deductible. Not too good!
Replacement Cost– Does not take depreciation into account. It replaces your item(s) in today’s dollars, less your deductible.
Fair Market Value– What you could sell your asset(s) for today.
Perils– Anything that goes wrong.
Extended Values– In our state, this means the insurance company pays for 125% of your insured amount.
Scheduled Property– Property that has significant value and should be listed on your policy. Think about your jewelry, guns, silver, gold, money, computers, manuscripts, tools, and so forth.
Umbrella Liability Policy– A cheap way to insure against big mistakes. If you are driving and have an allergy attack and start sneezing uncontrollably and cause a five car pile-up, you will be glad you have this policy. It will help keep you out of a courtroom.
Exclusions– What your insurance will not cover. The best example of this, in most states that allow them, is the insurance companies lack of payment in case of an act of war, nuclear disaster, flood (external rising water), and (in the southeast) hurricane coverage. In most states, one can add earthquake coverage.
Flood Insurance– The government’s second attempt at a national insurance program. If you live in a flood prone area, you really need this insurance. However, like Obamacare, it is too expensive, lacks some coverage, and has high deductibles. This is a standardized coverage nationwide. I live on a plateau that has never flooded in our town. It would cost me $365 to have flood insurance, in an area with a very low chance of occurrence. I can only imagine how much it would cost in the states that have wide-spread flooding.
Rates– What you pay for insurance. Rates are approved by each state’s department of insurance.
Pet Insurance– Don’t do it! This is “feel good” insurance that most veterinarians in my area say is a waste of money.
Insurance is broken down into sections. Each section covers a specific area of your properties. We will now examine the various sections.
Coverage “A” – Your Dwelling
The best conversation I have with clients is the amount of coverage they have on their home. You are insuring the reconstruction cost of your home, not the fair market value of your home. This means if you have a 1,500 square foot home, multiply it by the cost to replace a house like yours. Where I live, the building inspector told me houses are being constructed for $100 per square foot, if it is an average house. For higher end homes, it can be as much as $125 to $200 per square foot. So, in this example, the average house should be insured for $150,000 (1,500 square feet X $100). Your home might only sell for $120,000, if you sold it. Be sure to insure the rebuilding amount.
Some companies guarantee to replace your home no matter what the cost. This is called the “unlimited replacement value”. Other companies will offer extended limits. In my state, the “extended limits” means that your house has an extra coverage of some percent determined by the insurance company. The company I write most insurance for has extended coverage of 125%. In the example above, the individual would have coverage of $150,000 times 125% or $187,500.
Is this a good option? Yes. Let’s say your insurance renews on May 1, 2014, and you elect “extended limits” coverage. On July 10, 2014, the Federal Reserve System announces it is stopping quantitative easing immediately. The cost of all goods and service rises quickly. You have a house fire on October 27, 2014. In the example above, the house is insured at $150,000. Because the cost increased quickly, to replace your home now costs $180,000. Your insurance coverage did not increase, but you are covered. Had you decided to wait until your policy renews to increase your coverage and did not have this coverage, you would be in a world of hurt. It does not cost much to have this peace of mind.
Coverage “B” – Private Structures
Private structures are building other than your main home.
They too are settled on the same basis as your home.
Be sure to tell the agent that you have a storage building, underground shelter, barn, or other buildings.
Coverage “C” – Personal Property
If you take the roof off your home and then turn the house upside down and shake it, the stuff that falls out is your “Personal Property”. This includes your prepping supplies. You can increase this amount from the policy minimum. Some items are required to be scheduled. See the definition of Scheduled Property above.
- Guns– Some companies require that the serial number and models be listed. Make your own choice.
- Ammo– Companies treat this different. Check with your agent.
- Food– This can include stored freeze-dried food as well as home canned food. Check with the agent.
- Medical supplies and Prescriptions– I have stored pain pills, since I suffer from kidney stones. I also have some basic medical training and have an extensive group of medical supplies and surgical kits. I made sure this was covered before I went with my insurance company.
- Refrigerated Food – This includes food in the freezer and refrigerator. There is usually a stated dollar amount of food allowed. Be careful, many people made a claim for refrigerated food after a tornado went through our town and power was out. This $500 to $1,000 claim was treated just as if their house had been hit by the tornado. Many insurance prices went up with this small claim.
- Gold, Silver, Money and Nickels – If you have stored up metal for the end of the world, you better insure it against theft. Metals are limited to a small amount. Call your agent.
Please make sure you have replacement cost settlement on this part of your policy. If they use depreciated values, your 15 year old sleeping bag will have no value. However, you could not buy my bag from me. I consider it a part of my life. At least I would get a new bag.
Part “D” – Loss of Use
Should your home become uninhabitable, your will need other shelter. This coverage will reimburse you for the cost to live somewhere else while your home is being rebuilt.
Part ”F” – Liability
This will cover the cost of people who get injured at your home. Think pools, trampolines, and dangerous dogs! I encourage my clients to consider an Excess Liability Policy or Umbrella Policy. They are cheap and will cover your driving and your accidents at home.
Should someone break into your home and you hit them over the head with a meat tenderizing mallet or in some other way have them meet their demise, what will protect you from the law suit? The Umbrella Policy. For a few hundred dollars a year, this is good to have. At 44 years old, I am too old to start over for a mistake that really hurt someone.
This is the basics of insurance. If you were my client, I would spend about two hours with you discussing what you are looking for. If you want a quick quote, with a cheap policy, I might not be the right agent for you. Notice, I call you a “client”, not a “customer”. Clients mean you have a long-term relationship, while a customer is a one and done relationship.
Find you an insurance agent that is willing to listen to you. When you think about insurance, ask yourself three questions: What coverage do I need? How are claims settled? What is the best price? Do not reverse these questions.
You do not need a salesman for your agent, you need a caring person. Set down at least once a year to discuss your coverage. Make them talk to you!
As I stated above, this is a basic lesson in how to cover your prepping supplies and your retreats (homes). I am only licensed in one state and do not in any way imply that I know it all about each state’s requirements and rates.
Look for an agent that has your best interest at heart, not his own bottom line. Record your conversations when talking about coverage. If he says your roof will be settled on replacement cost basis, and it ends up being settled on the actual cash value method, you might get him to pay the difference. Otherwise, you would have no chance.
If you ask him to make a change to your policy, ask for proof of the change.
Read your policy. Ask your agent to explain the things you do not understand.
Make a video of your stuff! Lay out your undies, your tools, your prepping supplies and everything else you have. Then, video it! Store the video away from your home. Add up the cost of your prepping supplies and make sure you have enough coverage under the personal property section.
I am unique in the fact that I am a prepper and an agent. I have extra tarps, generators, and extensions cords for my clients to use if the power goes out for a few days following a tornado. You might find someone like me in your area. Insurance is designed to pool all our money together and help each other out during an emergency.
The company I represent most was the first to settle more than 95% of the claims when Hurricane Sandy hit. I was proud to hear this. Insurance companies should be there for us. That is why we pay our hard earned money to the company.