Your Home and Family Risk and Disaster Drill (Part I)

Recent events like the seemingly impossible East Coast earthquake and the hurricane season have been good reminders that we need to perform financial check-ups periodically on a variety of issues. In the past we’ve discussed a checklist of essential legal and financial planning, but even when that planning exists a periodic review is essential to make sure that it is adequate, known by your family, and complete.

Your Estate Plan, Mortgages, and Titles to Property/Insurance Documents: Where Are They?
Most people overlook the importance of being able to document the important business and legal transactions that are the center of their wealth and security. Amazingly few of us take proper care of those documents or have a place where they are safely and predictably stored. Yes, those paper banker’s boxes from the office supply store are great until a flood, fire or other unexpected surprise takes them out, then what? When Costco and other big retailers have fire- and water-proof safes that will hold your documents for as little as $100 - and larger gun safes capable of holding documents, jewelry, laptops and many other valuables for as little as $500 - delivered to your door, there is no longer an excuse to not have some way to secure these items.

Who ELSE Knows Where These Items Are?
In many families, certain issues are often handled by one party or the other, even if these issues are joint decisions. We often see an unfortunate gap in the knowledge of the details, however. This adds stress, expense, and delay during difficult times. Make sure your spouse or (or other responsible parties) knows where the documents are and how to reach them. If you have team members, like a financial planner, lawyer, insurance agent, and CPA , make sure your family knows who they are and how to reach them.

Is the Coverage Adequate and Complete for Your Current Level of Success?
As hard as it is to believe, there are still people with substantial home equity. Most of those people have been in their home a decade or longer or committed a large amount of cash to the purchase of their home, making it one of their most valuable assets. A review of the homeowner’s policies of many of these people shows some frightening gaps in the coverage in several areas.

First, we often see that the PERSONAL PROPERTY LOSS coverage successful people have in place does not account for what they have accumulated and purchased in terms of their décor, furnishings, appliances, fixtures, and clothing. Take a look at your policy and see what the limits are then walk around the house and add up the costs of the contents of every room and whatever you have stored in the garage and attic (bikes, sports equipment, holiday décor, etc.) and you will likely be stunned by the amount of money you have tied up in those things. Now imagine having to replace all of them out of pocket in current dollars…

Second, we often see that valuable collections of personal property are underinsured, uninsured, or completely excluded from certain policies. Common examples include guns, high-value electronics, and jewelry.

Finally, makes sure the alternate dwelling and replacement cost for complete loss coverage you have in place is adequate for your current family. The policy limits you put in place while single or newly married may not be enough to cover adequate housing for your family of four with two pets while your home is being rebuilt. Similarly, the construction cost of your home at its current level of finishes and upgrades may be substantially above what your insurance company thinks is “reasonable, adequate, or equivalent”. If you have spent large amounts of money upgrading your home, finishing that basement, and redoing the kitchens and bathrooms, you know what’s involved; be sure your carrier knows too.

In Part Two of Your Family’s Risk Drill we will discuss digital assets, a family emergency plan, and other simple ways to achieve predictability, safety, and peace of mind.

Learn more about Ike Devji, J.D. and our other contributing bloggers here.