FEDweek

Protecting the Asset You Live In

In retirement, one of your major assets will be your home. Is your homeowners insurance adequate to protect such a valuable asset? Check your policy to see what you have:

* All risks. Ideally, you’ll have a “broad form” or “all risk” policy. That will cover all types of losses except any that are specifically excluded. If you have “named perils” coverage, the personal property in your home is covered only for causes of loss that are specifically named in the policy.

* Full replacement cost. Again, this terminology indicates you have a high-quality policy. In case of loss, you’ll be reimbursed by the amount needed to replace an item with a new one. Other policies known as “actual cash value” will provide only the current value of replaced items (replacement cost minus any depreciation), and they may require receipts.

The “full replacement cost” feature applies to your home as well as to personal property within the home. If you have this type of coverage, the insurer pledges to pay the amount necessary to restore a damaged home to its previous condition. With other types of homeowners policies, you may find your coverage is inadequate to cover all the costs you’ll incur.

What if you downsize in retirement, for example moving into a condo? Remember, if you’re a condo owner you’re a homeowner so you still need a homeowner’s insurance policy. However, you need to make sure your policy is well-integrated with the insurance carried by your condo association.

Condo association’s insurance: In general, the condo association’s policy will cover the building’s structure, up to the primer coats of paint on the wall, ceilings, and the bare wooden floors.

Individual condo owner’s insurance: You must insure anything from there. Therefore, you should have a comprehensive replacement policy that covers not only your personal belongings but also your woodwork, kitchen cabinets, bathroom fixtures, and wall coverings.