Be vigilant about insurance

Dear Dave: My wife and I are on Baby Step 3, and we were talking the other day about how our home, travel trailer and cars have appreciated recently. Everything is paid for except the home, but we were wondering if we should increase the amount of insurance coverage on these items since they have skyrocketed in value. – Dale

Dear Dale: Yes! And you should make it a habit to review all your insurance coverage once a year.

With most homeowners insurance policies you have a stated amount of coverage. Some policies have a "cheat" that allows you an extra 5% or 10%, maybe even 20% in some cases. But if you have a $300,000 policy on a house you bought five years ago, and it has appreciated to $450,000 then burns to the ground, you're screwed. The only thing dumber than not having enough insurance to replace belongings like that is having no insurance at all.

Lots of times, in the old days, if you bought a car or homeowners policy, it covered your car or home regardless – even if they had gone up in value. Then, when some insurance companies got absolutely hammered after some events like Hurricane Katrina, they stopped doing that. They stopped covering actual replacement value and started covering only the specified amount on the policy. Today, it can be tough to even find replacement value coverage on houses. And if you do, it's crazy expensive.

When it comes to your home especially, you need to have a policy equal to the value of the home, and you should revisit your coverage and your home's value every year. You have to be vigilant about things like that, Dale, because your insurance company won't be! – Dave