
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, December 5, 1993                   TAG: 9312060389
SECTION: HOMES                    PAGE: E-1   EDITION: METRO 
SOURCE: JAMES S. RUSSELL THE NEW YORK TIMES
DATELINE:                                 LENGTH: Medium

HERE'S HOW TO MAKE SURE YOUR HOUSE IS ADEQUATELY INSURED

Is your house fully covered against a fire or a natural disaster? Even if you bought the broadest form of homeowners' policy, you may not have enough coverage. Nearly a third of the homes destroyed in the fires in Oakland, Calif., in 1991 were underinsured, according to the California Department of Insurance.

Why are homes often underinsured? In the case of the Oakland fires, the department found that insurance companies often inadequately estimated the replacement cost of a home in order to offer low premiums. Policy limits often did not reflect the real costs of rebuilding "different kinds of homes in different settings," according to a state report.

And insurance agents are allowed to calculate a policy's limit at as little as 80 percent of the home's replacement value; a house that would cost $100,000 to rebuild is insured for only $80,000.

This reduction is permitted because in the case of most fires, the foundation of the home is saved and is re-usable. (In California's recent brush fires, though, many foundations were destroyed.)

If you are concerned that your policy limit might be inadequate, ask your agent how it was calculated. You or your company may have to hire someone to appraise your house, said June Bruce, manager of corporate communications at the Insurance Services Office in New York, which provides advisory data and rating information to the property-casualty insurance industry.

The insurance company should periodically raise the limit of your policy to reflect inflation in construction costs.

Older homes, especially those with expensive materials or hard-to-replicate craftmanship, are especially likely to be underinsured. Keep in mind that in rebuilding, an older home will have to meet current building codes. The additional expense is not usually covered by insurance.

Some companies offer a "guaranteed replacement cost" policy. With this plan, the company agrees to pay a certain amount above the face value of the policy, reducing the likelihood of the policyholder being underinsured.

Insurers may not offer replacement-cost coverage in high-crime areas or other high-risk areas like the California brushlands. In most states, including New York, homeowners in such areas can buy coverage through Fair Access to Insurance Requirement plans, in which pools of insurers share the risk according to the amount of business they do in the state. Such plans, however, usually cover only the current value of the home, often much less than replacement cost.

Protecting your valuables: Insurance policies usually cover a house's contents up to 50 percent of the house's value. Document your valuables with videotapes, lists and photographs, with estimates of their replacement value attached.

The list will not only speed resolution of a claim but also help you decide whether you need more coverage. Keep valued papers and jewelry in locked fire-resistant boxes or safes.

If you work out of your home: Homeowners' policies, Bruce said, don't usually cover home businesses. What is needed is a small-business owner's policy, including liability coverage.

If you need to make a claim: Notify your insurance company as soon as possible. You must make temporary repairs to protect your home (keep receipts; the work should be covered), but permanent repairs should be made only after you have been visited by an adjuster.

Take photographs and make lists of damage. Solicit contractor bids to make sure that the proposed settlement from your insurance company is adequate. If it is not, review it with the claims manager.

by CNB