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Learn how your insurance works - before you need it

Jun. 18, 2007 - 12:44PM   |   Last Updated: Jun. 18, 2007 - 12:44PM  |  

Listen up. When you spend your hard-earned dollars on personal items, from a TV to clothes and dishes, you want to protect your investment in case something happens to your home, whether you own or rent it.

And if you own your home (or, more likely, are making mortgage payments), you want to be sure your investment is protected, as well.

There are several things to consider when it comes to insurance, in this prime season of moving for military members and their families. Deployments bring up insurance questions, too.

Just as some insurance companies have a war clause for your life insurance, some companies have war clauses for your personal property. According to the National Association of Insurance Commissioners, in many states most policies exclude coverage for damage caused directly or indirectly by war.

So ask your insurance company whether your homeowners or renters policy will pay to repair or replace items you take with you during your deployment.

Whether it's your personal items or your home itself, make sure you know whether your policy provides full replacement value or actual cash value. Full replacement value will pay the full cost of replacing or repairing the item, without deducting for depreciation. Actual cash value, also known as depreciated value coverage, is the amount it takes to repair the item after depreciation.

Moving

When you visit your personal property or transportation office to arrange a household goods move, they will tell you the government does not pay full replacement value for your goods if something is lost or damaged. So even though you may have paid $2,000 for your television several years ago, you'll get the depreciated value if it ends up broken — less than the $2,000 it may take to replace it.

That's going to change. Congress passed a law last year that, starting no later than March 2008, the government must pay for military members to get free full replacement value coverage for anything lost or damaged in a household goods move. In the meantime, the government pays for depreciated value coverage of up to $1.25 multiplied by the shipment weight. If your shipment weighs 10,000 pounds, the maximum coverage would be $12,500. Another thing to consider: There is also a maximum allowable loss on certain items. If six items were ruined and you paid $2,000 for each of them, you probably wouldn't be reimbursed $12,000.

There are options for purchasing additional coverage.

•Through the government: Additional basic depreciated coverage, for 64 cents per each $100 above the government-provided $12,500 coverage. If you wanted $30,000 worth of coverage for a 10,000-pound shipment, you would pay $112 for the additional $17,500 in coverage. Make these arrangements at the time you arrange for your household goods shipment.

•Through the government: Full replacement value coverage of up to $3.50 times the shipment weight — or $35,000 for a 10,000-pound shipment. The charge is 85 cents per $100 of the stated valuation; you would pay about three-fourths of the cost, with the government picking up the rest. So for full coverage on a 10,000-pound shipment, you'd pay $217.50 and the government would pay $80. You'd also make these arrangements at the time you arrange for your household goods shipment.

•Through a private company: Check with the company that insures your household goods to see what coverage is provided. Compare prices with other companies. To check out insurance companies, call the state insurance department to confirm that a company is legitimate and authorized to sell insurance in the state, before you buy a policy from that company.

Homeowners and renters

Make sure your personal property is covered by insurance, even if you are renting. Generally your landlord (including the government) will not pay for damage to your possessions if there's a fire, flood, theft or other disaster. If you live in government-owned housing, buy insurance for your personal property.

In some military privatized housing, the management company offers renters insurance. Check the price, and shop around.

Got that? You're good to go.

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