Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Kim Lankford, the Insurance Editor of Kiplinger's Personal Finance Magazine to talk about protecting your home owners insurance. Kim, we know that home owners in New Orleans and Florida have a lot of trouble with home owners insurance. But now I understand it's spreading the other parts of the country where insurers are dropping policy holders?
Kim Lankford: It's true. After Hurricane Katrina, a lot of insurance companies started to get worried about having too much exposure in high risk areas and they are considering high risk in some surprising areas, in fact up and down the east coast. Some insurers are cutting back on their policies, dropping policy holders because there is some big storms predicted for the next year. So you might be surprised when you get dropped.
Kevin McCormally: Okay, Kim is there any way I can protect myself?
Kim Lankford: The best thing to do is stay off the insurance company's radar screen and that means not submitting small claims.
Kevin McCormally: But wait a minute, I thought that's the reason I had insurance what so I could submit claims when I had damage.
Kim Lankford: That does seems a little strange, doesn't it? But insurance companies really don't want you to submit claims that are just for a few hundred dollars above your deductible. It costs them a lot administratively and they have been dropping people who submit just about two or three small claims. So really be careful about submitting claim.
Kevin McCormally: What's the best way to avoid that?
Kim Lankford: Well, when you get any damages, first figure out how much it might cost to replace them yourself. If it's just a few hundred dollars above your deductible, then think about paying that yourself out of your own pocket.
Kevin McCormally: What about the idea of raising your deductible?
Kim Lankford: That is the most important thing over the long run. In fact, we recommend raising your deductible to at least a $1000 because you are going to play their game, so at least you might as get well get some benefit from it. That can lower your premiums by about 30%.
Kevin McCormally: Okay, I will raise my deductibles, but how do I know whether or not I have the right amount of insurance to begin with.
Kim Lankford: Well, there are two things that 1:45 people a lot when they are figuring out the right insurance amount. One thing is some people insure for too much, they actually think that the market value of their home is the same as the insurance value, but it's not. If anything were to happened to destroy your home, you would still have the land. That's still worth quite a bit of the cost of your home, so you really need to talk with someone an appraiser, a builder about rebuilding costs.
Kevin McCormally: Okay and some people are actually under insured.
Kim Lankford: On the other hand, a lot of people are under insured. So many people have been doing home improvements recently. Indeed to let your insurance company know of you have, so you can get coverage for that extra amount.
Kevin McCormally: Okay, thanks Kim.
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