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Can you ever have too much property insurance?
It hardly seems possible when you look at the photos of the devastation four hurricanes brought to Florida.
However, some homeowners have more than they want. As premiums rise - and they are sure to go up in the wake of this hurricane season - reducing coverage is one way to reduce costs. Several readers already have asked me about this. If you've had this thought, here are two things you need to keep in mind:
1. The smart way to reduce coverage is to cut from the bottom by increasing your deductible. The real reason to buy insurance is to protect yourself from a catastrophe, not to cover minor damage from leaky pipes. Your homeowners policy should have at least a $1,000 deductible. If you're already there, consider raising it; ask your agent for quotes for various deductibles. In effect, you are self-insuring for the amount of the deductible, so it's important to keep enough money in your emergency fund to cover it if you go this route.
2. If you are thinking of cutting from the top and reducing your maximum coverage, your options are limited by your mortgage lender, Florida law and insurance company policies.
If you have a mortgage on your house, your lender will require you to maintain insurance at least equal to the amount of your loan. Your house is collateral for the lender's loan and if the house is destroyed, the lender wants to be sure it will get paid.
If you have replacement coverage on your house, as you should, your house generally must be insured for at least 80 percent of its value. If you insure for less than that, your check from the insurance company to cover any claims will be reduced proportionally.
One reader wrote to ask if he could opt out of windstorm coverage, apparently preferring to take his chances on being wiped out by the next hurricane. The answer depends on where you live. Florida law requires homeowners policies to include windstorm coverage in most areas of the state. But if you live in a designated windstorm area, you can get a policy without windstorm coverage. In fact, if you live in one of those areas, windstorm coverage might not be available to you except through Citizens Property Insurance Corp., the state's insurer of last resort.
What about personal property coverage? A reader sent in the following complaint:
Q. The insured value of my house is $105,000 and my premium this year is more than $1,000. My gripe is that my personal property is insured for $79,200. No way is my property worth even half that at new purchase prices. The insurance company says I cannot reduce the amount if I want to keep my homeowners coverage. Do I have the right to reduce this?
Not if it's important to stay with this insurance company. This is a matter of insurance company policy, not law. Typically the insured value of the personal property will be a set percentage of the insured value of the house and the premium will be calculated based on that formula.
Are there other companies out there that calculate things differently? Absolutely. The problem is finding the right policy at the right price with a company that is writing new insurance in your neighborhood.
Q. I am a teacher who buys supplies for my classroom. Can I still get an income tax deduction for what I spend?
Yes, so save your receipts. The deduction (up to $250) expired at the end of last year, but Congress just agreed to extend it for 2004 and 2005. Unlike most deductions, this one can be claimed even if you take the standard deduction and do not itemize.
It is available to teachers, aides, counselors and principals who work at least 900 hours during the school year in elementary or secondary schools.
READER RESPONSE: Clearwater lawyer Nicholas Taldone wrote that he too has had success in obtaining money from brokerage firms whose brokers sold investors viaticals from Mutual Benefits Corp. If you or someone you know purchased one of these investments, it is definitely worthwhile to discuss the case with a lawyer experienced in bringing claims against brokerage firms.
Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.